Price Indexes are a Problem for Testing PPP Report as inadecuate




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Abstract

This note illustrates a problem in purchasing power parity studies that test for stationarity of the real exchange rate. If the real rate series is constructed using price indexes then the real exchange rate may not be stationary even if the law of one price always holds for every good in the indexes.



Item Type: MPRA Paper -

Original Title: Price Indexes are a Problem for Testing PPP-

English Title: Price Indexes are a Problem for Testing PPP-

Language: English-

Keywords: PPP, real exchange rate, price indexes-

Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion ProcessesF - International Economics > F3 - International Finance > F31 - Foreign Exchange-





Author: Wallace, Frederick

Source: https://mpra.ub.uni-muenchen.de/65786/







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