A panel project on purchasing power parity: Mean reversion within and between countries

• 成果类型: Article
• 署名作者: Frankel, JA; Rose, AK
• 署名单位: University of California System; University of California Berkeley; Center for Economic & Policy Research (CEPR); National Bureau of Economic Research; University of California System; University of California Berkeley
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/0022-1996(95)01396-2
• 发表日期: 1996
• 页码: 209-224
• 关键词: long-run; cross-section; time-series; real; Exchange rate; inflation; variation

摘要

Previous time-series studies have shown evidence of mean-reversion in real exchange rates. Deviations from purchasing power parity (PPP) appear to have half-lives of approximately four years. However, the long samples required for statistical significance are unavailable for most currencies, and are potentially inappropriate because of regime changes. In this study, we re-examine deviations from PPP using a panel of 150 countries and 45 annual post WWII observations. Our panel shows strong evidence of mean-reversion that is similar to that from long time-series. PPP deviations are eroded at a rate of approximately 15% annually, i.e., their half-life is around four years. Such findings can be masked in time-series data, but are relatively easy to find in cross-sections.