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An International Comparison of Prices and Exchange Rates: A new Test of Purchasing Power Parity
Abstract
This paper introduces a new approach based on Divisia index numbers to test PPP with both short-run and long-run data for all major currencies simultaneously. The short-run results indicate that the predictions of PPP do not hold up at all well. On the other hand, however, the long-run data are quite consistent with the PPP hypothesis. The results also identify five years as a broad measure of the length of the long run insolar as PPP is concerned.
... On the other hand, the positive relationship holds true for the effect of interest rate on the exchange rate in the long-run is explained by the comprehension that when the interest rate in the domestic country increases, it raises the chances of an increase in the inflation of that country as compared to the foreign one, which depreciates the domestic currency. Depreciation of the domestic currency increases the trade balance of the domestic country and decreases the foreign trade balance, which brings on a rise in the domestic interest rate and a fall in the foreign interest rate (Hacker et al., 2012;Hacker et al., 2010).The hypothesis that the exchange rate is determined by the purchasing power parity (PPP) based on the relationship between exchange rates and prices, was disclosed in the study of Manzur (1990). This hypothesis in its absolute form mentions that exchange rate is the ratio of home prices to foreign prices, and in the relative form it is stated as the change in the exchange rate equal to the differential of the inflation (Manzur, 1990). ...
... Depreciation of the domestic currency increases the trade balance of the domestic country and decreases the foreign trade balance, which brings on a rise in the domestic interest rate and a fall in the foreign interest rate (Hacker et al., 2012;Hacker et al., 2010).The hypothesis that the exchange rate is determined by the purchasing power parity (PPP) based on the relationship between exchange rates and prices, was disclosed in the study of Manzur (1990). This hypothesis in its absolute form mentions that exchange rate is the ratio of home prices to foreign prices, and in the relative form it is stated as the change in the exchange rate equal to the differential of the inflation (Manzur, 1990). Looking back at the history of PPP, Manzur (1990) has stated that the first principle regarding the PPP theory was presented in the 16 th century and not during 1920s by the Cassel. ...
... This hypothesis in its absolute form mentions that exchange rate is the ratio of home prices to foreign prices, and in the relative form it is stated as the change in the exchange rate equal to the differential of the inflation (Manzur, 1990). Looking back at the history of PPP, Manzur (1990) has stated that the first principle regarding the PPP theory was presented in the 16 th century and not during 1920s by the Cassel. In the tracks of PPP history, the other striking name is of Balassa (1964), who first identified the hypothesis of systematic bias for the measurement of equilibrium exchange rate in the absolute PPP. ...
This paper examines the relationship and the impact of interest rate and CPI difference from one year to another on the exchange rate of the home country. This particular study has been conducted in the context of Pakistan which serves to be the home country, and the empirical findings are made in relation to China, Japan, UK and USA. The study uses the panel data concerning the exchange rate, interest rate and CPI difference for all the five countries ranging from the first quarter of 1991(Q1) to the last quarter of 2011(Q4). The results of the study validate the conjecture of the literature that in the long-run, inflation affects the exchange rate in a positive way, while interest rate prevailing in a country has a negative impact on the exchange rate. The results of the panel data regression on the cumulative data of all the countries, with fixed-effect and random-effect shows that the relationship prevails but both the CPI difference and interest rate affects the exchange rate to a very insignificant level. Comparatively, the results of LSDV, which involved evaluating the coefficients on the country-specific level, shows that interest rate and CPI change has significant impact on the exchange rate.
... Their estimate suggested that PPP deviations have a half-life of four years. A study by Manzur (1990) that introduced a new approach, Divisia index numbers, tested PPP for both long-and short-run equilibrium among G7 countries as a group. The short run results vindicated the literature, whereas the long-run results were consistent with the PPP hypothesis and supported the sticky price explanation. ...
... New analyses of the Latin American region of countries, presented in Table 8, found that PPP is only achieved after a longer period, about ten years. This discovery is puzzling: their sticky prices could not be worse than those of the G7 countries, as mentioned in Manzur (1990). Both the covariances and correlation coefficients of domestic price-exchange rate increase at first but then fluctuate between 0.2 and 0.7 for the longer range of time intervals. ...
... As mentioned inManzur (1990) as well asManzur and Ariff (1995), the long-run cut-off threshold for a correlation coefficient to be considered close to unity is when it is above 0.8. ...
Finding evidence of the theoretical relationship between exchange rate and inflation has been a difficult proposition in an exchange rate market, despite many studies in developed markets. Three recent papers employing a new research design, Theil’s Divisia index method, found that this relationship holds only in the long run, given the sticky price hypothesis. However, this relationship has not yet been tested for economic regions with close trading networks. The use of this method enables us to resolve a longstanding issue as to the veracity of Purchasing Power Parity (PPP). This paper presents results that suggest long-run equilibria in two close trading regions, within both developed and emerging economies. We believe that these findings on long-run equilibrium and the length of time to equilibrium will enrich the literature on exchange rate market behaviour in both developed and emerging markets.
... This is a major evidence to support a long run idea. A study by Manzur (1990), which introduced a new approach, the divisia index numbers based on Theil's mathematics, tested PPP for both long-and short run equilibrium for G-7 countries. The short run results vindicated the literature of no effect whereas the long run results were consistent with the hypothesis, producing for, the first time, a measure of time-to-equilibrium that supported sticky price explanation. ...
... For the region of developed countries in Table 2, changes in exchange rates and inflation differentials are almost always very closely linked with matching direction of change. Similar results were obtained in Manzur (1990) where only six countries were studied in his study. In this study, not only are Germany and Japan having lower inflation rates, but the Netherlands and Switzerland are also countries with lower relative inflation rates and therefore experiencing appreciation of their currency values. ...
... Column (2) is the natural log change of exchange rates, while column (3) is the natural log change in domestic currency prices. Column (4) measures the difference between domestic currency prices and US dollar prices and column (5) Manzur (1990) as well as Manzur and Ariff (1995) the long run cut off threshold for correlation coefficient close to unity is when it is above 0.8 as also used by other researchers. ...
This paper reports different times-to-equilibrium for G-10 developed economies and the Eastern European emerging economies. By applying a novel method of value-weighted index to highly-trade-linked economies, we test the purchasing power parity to the full length of time-to-equilibrium. The times-to-equilibrium obtained are: 6 years for developed and 2 years for emerging economies. These results are consistent with the sticky price hypothesis: economies trading in highly aggregated capital goods take longer time to reach price equilibrium in the face of overshooting exchange rates: the opposite is true for primary exporters. This finding is new for these two groups, and could be compared usefully with the earlier reports of long half-life for developed countries. Also, our method of measurement establishes the actual time of the theory prediction on price-to-currency relationship. It is possible to apply this methodology to study more groups of countries.
... The first study to measure the time to equilibrium, using a new measurement method to test price parity within a group of countries, showed evidence consistent with Dornbusch's sticky price hypothesis. That study (Manzur, 1990) established that (a) there is only long-run equilibrium between exchange rates and price levels and (b) the time to equilibrium of the Group of Seven (G-7) developed countries is about 6.5 years. There has been little effort to follow up on this methodological lead to investigate this important policy-relevant issue of time to equilibrium between prices and exchange rates of other regional economies; thus many key trading regions remain untested on this topic. ...
... Their estimate implied that the half-life of PPP deviations is 4 years (using a method different from Divisia index in this study). A study by Manzur (1990), which introduced a new approach, Divisia index numbers, tests PPP for both long-and short-run equilibrium using data of G-7 countries, as a group. The short-run results vindicated the null findings in the literature, whereas the long-run results were consistent with the PPP hypothesis. ...
... Following the specifications in Manzur (1990), the approach can be briefly explained as follows. Let there be n countries in the sample and let the price levels in these countries in terms of domestic currencies be p 0 1 , . . . ...
The theoretical relation between exchange rate and prices has been a difficult proposition to find supporting evidence despite many studies of developed economies using standard research methods. The exchange rate to price relation appears to hold in the long run only, a result consistent with sticky price hypothesis. There is a need to add to this sticky price literature by examining more yet-studied economies to this area of research. This article presents results to support long-run equilibrium in the Asia-Pacific economies as being 5 years. The methodology is used to group countries with high-trade intensity within a region and value-weight the resulting variables to test the theory in a regional context. Our positive finding on the long-run equilibrium, we believe, helps in some ways to enrich the literature on the exchange rate behaviour of an important region for world trade.
... The first study to measure the time to equilibrium, using a new measurement method to test price parity within a group of countries, showed evidence consistent with Dornbusch's sticky price hypothesis. That study (Manzur, 1990) established that (a) there is only long-run equilibrium between exchange rates and price levels and (b) the time to equilibrium of the Group of Seven (G-7) developed countries is about 6.5 years. There has been little effort to follow up on this methodological lead to investigate this important policy-relevant issue of time to equilibrium between prices and exchange rates of other regional economies; thus many key trading regions remain untested on this topic. ...
... Their estimate implied that the half-life of PPP deviations is 4 years (using a method different from Divisia index in this study). A study by Manzur (1990), which introduced a new approach, Divisia index numbers, tests PPP for both long-and short-run equilibrium using data of G-7 countries, as a group. The short-run results vindicated the null findings in the literature, whereas the long-run results were consistent with the PPP hypothesis. ...
... Following the specifications in Manzur (1990), the approach can be briefly explained as follows. Let there be n countries in the sample and let the price levels in these countries in terms of domestic currencies be p 0 1 , . . . ...
The theoretical relation between exchange rate and prices has been a difficult proposition to find supporting evidence despite many studies of developed economies using standard research methods. The exchange rate to price relation appears to hold in the long run only, a result consistent with sticky price hypothesis. There is a need to add to this sticky price literature by examining more yet-studied economies to this area of research. This article presents results to support long-run equilibrium in the Asia-Pacific economies as being 5 years. The methodology is used to group countries with high-trade intensity within a region and value-weight the resulting variables to test the theory in a regional context. Our positive finding on the long-run equilibrium, we believe, helps in some ways to enrich the literature on the exchange rate behaviour of an important region for world trade.
... Frankel and Rose (1996a) examined PPP using a panel of 150 countries for forty-five years and confirmed that PPP holds and their estimate implied a half-life of PPP deviations of four years. A study by Manzur (1990), which introduced a new approach, Divisia index numbers, tests PPP for both long and short run equilibrium for G7 countries. The short run results vindicated the literature whereas the long run results were consistent with the PPP hypothesis and supported the sticky price explanation. ...
... This approach provides a test for each observation in the sample period, whereas a regression method provides a test over an entire period. Following the specifications in Manzur (1990), the approach can be briefly explained as follows: let there be n countries in the sample and let the price levels in these countries in terms of domestic currencies be . If the n exchange rates (defined as the domestic currency cost of U.S. $1) are then these price levels in t erms of U.S. dollars are which may be denoted as Consider a consumer who purchases the quantities from the n countries. ...
This paper provides new findings that extend the literature by investigating the time to equilibrium for price changes to catch up with exchange rate and the contribution of non-parity fundamentals in exchange-rate dynamics in a trade-related multi-country framework. It reports new findings on exchange behaviour by expanding the parity variables to include other theory-suggested variables with high and low-frequency multi-country panel regression analysis, and Divisia Index Model. Our findings indicate that exchange rates are affected by growth rates, capital and balance-of-payment flows, fiscal, monetary and other fundamentals. This study also confirms that long-run PPP equilibrium for a group of Asia Pacific countries is five years. These key findings are robust across different time intervals.
... Frankel and Rose (1996a) examined PPP using a panel of 150 countries for forty-five years and confirmed that PPP holds and their estimate implied a half-life of PPP deviations of four years. A study by Manzur (1990), which introduced a new approach, Divisia index numbers, tests PPP for both long and short run equilibrium for G7 countries, as a group. The short run results vindicated the literature whereas the long run results were consistent with the PPP hypothesis and supported the sticky price explanation. ...
... Following the specifications in Manzur (1990), the approach can be briefly ...
... In its 'absolute version,' the hypothesis states that the exchange rate (the domestic currency cost of a unit of foreign currency) equals the domestic-to-foreign price ratio. Manzur (1990) was one of the first to present evidence that PPP is a long-run phenomenon. He was also among the first to measure the long run: his findings identified five years as a broad measure of the length of the long run in terms of PPP. ...
The development of information technologies and the internet has caused one of the most significant changes in the business environment over the last decade. Companies have evolved to adapt to a digital environment influenced by internet business models and digital marketing techniques. More and more firms and enterprises around the world are responding to consumer higher sensitivity regarding the protection of environment and need by either embracing circular
economy models or adopting strategies of green marketing. These strategies may range from eco-friendlier supply chains, green packaging, environmentally friendly products or promoting broader efforts to reduce environmental impact. The current paper analyzes such strategies by using background cases that inform the primary Albanian case, to understand how fast the Albanian e-commerce companies are catching up with this environmentally friendly business models and how green marketing may help. The purpose of this study is to determine the level of green marketing adoption among Albanian E-businesses and to investigate the impact of business size on green marketing adoption. The research model was tested with national survey data collected from Albanian e-commerce firms of different business size. The present study opens broad horizons for the exploration of green marketing strategies in the e-business proactiveness and the impact on e-business agility in responding to environmental uncertainty. This this study shows that future-oriented companies can profit economically while reducing their negative environmental impact.
... In its 'absolute version,' the hypothesis states that the exchange rate (the domestic currency cost of a unit of foreign currency) equals the domestic-to-foreign price ratio. Manzur (1990) was one of the first to present evidence that PPP is a long-run phenomenon. He was also among the first to measure the long run: his findings identified five years as a broad measure of the length of the long run in terms of PPP. ...
Ellen MacArthur Foundation estimates that around 80% in the consumer goods sector is lost
on annual terms. Hence, the linear economic model (take-make-waste) cannot be anymore an
appropriate model considering the growth population, the limited resources, etc. Therefore a
new economic model is emerging and developing in a very fast pace. This is what we call
circular economy. This model aims at effectively manage materials stream and the use/reuse
of products as long as possible. Such a model creates opportunities for businesses and at the
same time positively impacts the environment and promotes economic growth. Besides all
benefits that circular economy yields, still there is a lack of awareness about these benefits
from different stakeholders including governments, civil society organizations, businesses,
universities, etc. Besides the efforts sporadically taken by various researchers, still there is a
need of coordinated effort toward a better promotion of circular economy, as an indispensable
new economic model.
This paper aims at introducing the concept of circular economy and providing a more
comprehensive overview of the benefits of this novel economic model. In addition, this paper
provides the status quo of this model in Albania, accompanying with some success stories.
More outlines various definitions of circular economy. Moreover, the benefits of this economic
model are elaborated. Second part provides a general landscape of circular economy in North
Macedonia, its legal framework and the first efforts of the Albanian and North Macedonian
government to incorporate the concept into the draft strategy of waste management.
There are some conclusions and recommendations at the end of the paper.
Keywords: Circular economy, Management model, Albanian legislation, North Macedonia
legislation
... In its 'absolute version,' the hypothesis states that the exchange rate (the domestic currency cost of a unit of foreign currency) equals the domestic-to-foreign price ratio. Manzur (1990) was one of the first to present evidence that PPP is a long-run phenomenon. He was also among the first to measure the long run: his findings identified five years as a broad measure of the length of the long run in terms of PPP. ...
The transport sector significantly impacts the environment, specifically on climate change,
through greenhouse gas emissions and depletion of natural resources. Currently road
transport already creates 14% of the emissions globally and furthermore the number of
vehicles is expected to more than double by 2050. [1]
In the context of Albania, transport sector plays a significant role in environmental pollution
concentration. According the time-series data published by INSTAT (Statistic institute in
Albania) the transport sector is an important activity in Albanian economy and its contribution
to GDP during the last decades has been increased by 23%. Moreover, for the past 10 years a
total number of road vehicles in Albania is increased by 46%, making the transport sector the
second main contributors, to greenhouse gas (GHG) emissions with about 25% of its total,
while in the first place is ranked agriculture sector.[2]
Therefore, many studies recommend applying the circular economy concept to reduce the
negative effects of the above-mentioned issues. Circular economy concept is a new and
inclusive economic paradigm that addresses resource scarcity concerns to minimize pollution,
waste and extend product lifecycles. This concept stands as an opportunity to rethink urban
planning and redesign transport into a more circular concept that goes beyond reduced
emissions from transportation sector to create a healthier environment in urban areas.
This article aims to examine the effect of a circular economy on the transportation sector by
highlighting some of the best practices obtained through a literature review, helping to provide
a set of recommendations on how the application of this concept will affect the current context
of transport infrastructure in Albania.
... Besides, the significance and signs of the coefficients are not robust to changes in the lag selection procedures for most of the groups, which also demonstrate a very insubstantial support for the PPP with either black market or official data. Similar results have been found by Adler and Lehmann (1983), Manzur (1990), Huang and Yang (1996), Ahking (1997), and Bahmani-Oskooee and Goswami (2005). They all have failed to detect the long run stationarity of PPP using different types of tests. ...
Testing purchasing power parity (PPP) using black market exchange rate data has gained popularity in recent times. It is claimed that black market exchange rate data more often support the PPP than the official exchange rate data. In this study, to assess both the long run stability of exchange rate and the short run dynamics, we employ Pooled Mean Group (PMG) Estimation developed by Pesaran et al. (1999) on eight groups of countries based on different criteria. Using the famous Reinhart and Rogoff (2002) dataset on black market exchange rate in the framework of BahmaniOskooee and Goswami (2005), the results are in sharp contrast with the most recent studies. We find very weak and insufficient support for the PPP using both the black market and the official exchange rate data. The assumption of long run homogeneity is also invalidated for some groups. Therefore, the results of PPP testing are not conclusive even though we switch from the official rate to the black market rate for a global data set. The finding holds even though we swap static panel for dynamic heterogeneous panel in the light of PMG estimation.
... N(0,l). (5) Entre los trabajos en los cuales se examina esta forma de la PPA ex-ante están Manzur (1990Manzur ( , 1993 y García y Campoy (1995); al margen de la confusión entre PPA relativa (tal como aquí se define) y PPA ex-ante en la que se incurre, el procedimiento usado en estos trabajos es criticable, tal como se explica en Maeso ( 1998). ...
... 6. This theory remains consistent with the PPP theory, insofar as exchange rates will adjust for deviations from absolute purchasing power parity that are causing the current account deficit and then follow relative purchasing power parity thereafter (Manzur, 1990). The model is also consistent with the empirical findings reported by Murphy (1996) that, after adjusting for PPP effects, relative interest rate differentials directly have only a short-term temporary impact on exchange rates. ...
This research develops a theoretical model of current account deficits that explains the effects of having to reverse such imbalances. The theory defines precise mathematical relationships which should exist between the balance of payments, exchange rates, interest rates, inflation, income, and investor expectations. Applying the model to various examples indicates that it is consistent with both currency crises and less volatile situations.
... 7. Note that the model's implications remain generally consistent with the PPP theory, insofar as exchange rates will adjust at some point for deviations from absolute purchasing power parity that are causing the current account deficit and then follow relative purchasing power parity thereafter (Manzur, 1990). 8. ...
This research develops a theoretical model of current account deficits that explains the effects of having to reverse such imbalances. The theory defines precise mathematical relationships which should exist between the balance of payments, exchange rates, interest rates, inflation, income, and investor expectations. The model is consistent with both currency crises and less volatile situations.
... It is also one of the most-heavily researched topics in international ſ nance (Lan, 2003). Manzur (1990) was among the ſ rst to provide evidence to indicate that PPP is a long-run phenomenon. He was also among the ſ rst to provide a measure of the long run: his results identiſ ed ſ ve years as being a broad measure of the length of the long run in so far as PPP is concerned. ...
This paper provides a new test of PPP and its relevance for the euro. Principal component analysis (PCA) is introduced to construct a pooled measure of inflation for the 12 Euro-currency countries. This measure is used to test the purchasing power parity, PPP, condition for the euro against three major currencies, namely, those of the Japan, UK and USA. The test results are then used to measure the speed of adjustment of the deviations from parity using rolling and recursive regressions procedures. Finally, the forecasting accuracy of the PPP-based euro exchange rates is compared with those given by the random walk model, and the synthetic euro series provided by the European Central Bank. In general, the results are supportive of PPP.
... Studies focusing on groups of industrial countries include Abuaf and Jorion (1991) who find that the annual half-life in ten industrial countries is 3.3 years on average. Manzur (1990) considers seven industrial countries and find that the half-lives or their real exchange rates are 5 years while Fung and Lo (1992) put the half-lives to 6.5 years for the six industrial countries they consider. Cheung and Lai (2000) put the half-lives to a range between 2 and 5 years for industrial countries but under 3 years for developing countries. ...
Evidence of lengthy half-lives for real exchange rates in the presence of a high degree of exchange rate volatility has been considered as one of the most puzzling empirical regularities in international macroeconomics. This paper suggests that the measure of half-life used in the literature might be problematic and proposes alternative measures with desirable properties. Their focus on the cumulative effects of the shocks distinguishes them from the measures used in the literature. An empirical analysis of bilateral US dollar real exchange rates employing the alternative half-life measure produces results consistent with theory and indicates that the PPP puzzle is less pronounced than initially thought. Copyright (c) 2012 John Wiley & Sons, Ltd.
... Moreover, Cheung and Lai (2000) estimated that the half-lives ranged between 2 and 5 years for industrial countries but under 3 years for developing economies. A study by Manzur (1990) assessing seven industrial countries found that the half-lives of their real exchange rates were 5 years, while Fung and Lo (1992) put the halflives at 6.5 years for the sample of six industrial countries they consider. ...
This paper utilises various recently developed econometric methods to obtain better approximations to the half-life for real exchange rates of ten South African Development Community (SADC) countries and to generate confidence intervals for half-life deviations from the purchasing power parity (PPP). The robust methods of Stock (1991), Elliott and Stock (2001), and Hansen (1999) imply that point estimates of less than 36 months exist, making them compatible with PPP. However, the results of ADF and ADF-GLS tests render the SADC real exchange rates as nonstationary processes, a result that is patently at odds with mean-reversion, implying at the same time the possibility of infinite half-lives. Therefore the empirical results appearing in this paper do not convincingly resolve the half-life version of the PPP puzzle and leaves room for future research in the directions of non-parametric methods and median unbiased confidence intervals.
... One exception isManzur (1990Manzur ( , 1993, which also avoid taking pairs of countries in isolation. But our approach is based on the ratio of two variances, while Manzur is based on Divisia index numbers. ...
The aim of this paper is to estimate the length of the long run in the foreign exchange market. We do this by examining the link between exchange rates and relative prices, based on the implications of purchasing power parity (PPP) theory. Using a new approach, we test if the ratios of variances of exchange rates to prices are unity over all horizons, as implied by PPP. Through Monte Carlo simulations, we derive the variance ratios under the null of equal variances and examine the power and size of the test. We find evidence that PPP holds in the long run. While the long run based on the consumer prices appears to be “long”, about five years, the estimate of the long run based on the single good, Big Macs, is shorter (two years).
A large body of literature in international finance has attempted to estimate the speed of convergence between countries’ aggregate price indices to those levels predicted by purchasing power parity (PPP). This paper takes a novel approach by considering how this speed of convergence itself has evolved over time. Using a dynamic common correlated effects (DCCE) framework from Chudik and Pesaran (2015) applied to a panel of countries’ real exchange rates over the years 1960–2015, we find an average half-life of around 3 years. Moreover, we show that the estimated half-life fell by about 2 years over the course of the past five decades, suggesting that the so-called PPP puzzle (Rogoff, 1996) may abating over time. Our results also serve to contextualize past estimates by demonstrating a high degree of sample selection sensitivity in this literature. Furthermore, we propose explanations for the observed increase in the speed of international price adjustments, focusing primarily on the increasingly tradable nature of the composition of the U.S. consumer price index (CPI). We build a measure of tradability of the CPI and show that, despite an increase in the proportion of services in the average consumer’s basket, the CPI has become more tradable over time, thus offering a potential explanation for the observed increase in adjustment speed.
In Chapter 1 we looked at what exactly the foreign exchange market is, introduced a number of differing exchange-rate concepts, and examined a simple current account model of exchange-rate determination. In this chapter we look at one of the earliest and simplest models of exchange-rate determination, known as purchasing power parity (PPP) theory. An understanding of PPP is essential to the study of international finance, and the theory has been advocated as a satisfactory model of exchange-rate determination in its own right, providing a point of reference for the long-run exchange rate in many of the modern exchange-rate theories which we examine in later chapters.
We propose a simple but effective nonparametric method to estimate the expected time to cross a threshold using only two assumptions: Markovian property and stationarity. We provide an empirical application with real exchange rates to illustrate the method.
The explosion of research on the topic of purchasing power parity (PPP) since the 1970s is testimony to the theory’s undoubted appeal as a method for exchange rate determination. Indeed, the concept of PPP has endured some controversial findings in the empirical literature to become even more popular over the past decade, as the use of more sophisticated econometric techniques has evolved. Notably, the application of unit root and cointegration tests dominated the literature during the 1990s, with the majority of studies finding support for PPP for both developed and developing countries. However, doubts about the ‘power’ of these tests have given rise to debate over the veracity of using time-series data versus cross-sectional, or panel, data. Meanwhile, The Economist’s Big Mac Index has been another catalyst for PPP research over the past decade, with its easy accessibility and international appeal. Empirical tests of exchange rate behaviour, using the Index, have been surprisingly successful in proving the PPP condition, and have encouraged a school of research using this metric.
The relocating employee’s main concern is that the current standard of living can be maintained or improved in the destination country. This means that their purchasing power cannot fall. However, comparing home- and destination-country prices based on the existing exchange rate would be inappropriate since exchange rates only reflect purchasing power parity (PPP) in the long term. Thus, an index for real wages and expenses should be created whereby these prices are converted into purchasing power equivalents for each country. Using an index based on the ‘perfect universal commodity’, the Big Mac hamburger, as a price deflator, the real wages and major relocation expenses for US employees in some of the biggest commercial cities around the world are considered in this chapter. A model is subsequently developed whereby real wages can be approximated based on the market status and geographic location of the destination country. The results indicate that US employees would generally be worse off moving overseas if they are to be paid destination-country wages to take up similar positions; moreover, major expenditure items such as accommodation and cars are also extremely expensive in certain foreign cities. These findings can be used by multinational companies (MNCs), their employees, as well as economic migrants to define equitable and attractive salary packages.
The purchasing power parity (PPP) doctrine, one of the most widely researched areas in international finance, is also probably one of the most controversial in the theory of exchange rate determination. According to the theory of purchasing power parity, the rate of exchange between two currencies is determined by the differences in the price levels of their respective countries. However, while proponents of the theory argue that PPP provides a strong basis for determining exchange rates, others have contended otherwise, with a plethora of empirical research demonstrating persistent deviations from PPP. Consequently, we provide a survey of the issues that contribute to the problems in testing the theory. Notably, factors such as the lack of uniformity in the price indices used to determine the long-run equilibrium exchange rate — also known as the ‘index-number problem’ — and the issue of productivity bias, which is probably seen as the most serious criticism of PPP theory, are discussed. We also consider the role of market imperfections as well as structural changes in the economy.
In the course of purchasing power parity (PPP) research, much of the debate over validity has been over the choice of an appropriate ‘basket’ for making purchasing power comparisons. The different compositions of goods and services in these baskets across countries have resulted in arguments against their usefulness for PPP purposes. This problem is augmented by the existence of productivity differentials in traded and non-traded goods across countries. Therefore, we consider the use of the Big Mac hamburger as the international monetary standard as being a more palatable alternative. It is produced locally in over 80 countries around the world, with only minor changes in recipe, and thus has the flavour of the ‘perfect universal commodity’. Our results indicate that the Big Mac Index is surprisingly accurate in tracking exchange rates over the long-term, which is consistent with previous PPP research findings. We subsequently enhance our PPP comparisons by taking into account the productivity differentials between countries and excluding non-traded goods from the Big Mac Index to derive the No-Frills Index.
In recent years, academic staff unions and associations have argued for higher salaries for academics on the grounds that existing salaries have not kept pace with inflation, are well-below commercial salaries and, most glaringly, are much lower than the salaries of their overseas counterparts. However, most international comparisons are made based on exchange rate conversions, which is inappropriate since purchasing power differentials are only reflected in exchange rates in the long term. Furthermore, the volatility of exchange rates makes such conversions highly inaccurate. In this chapter, we provide a comparison of real academic salaries by converting the nominal salaries in each country to their purchasing power equivalents, using the Big Mac Index. Our results show that real academic salaries are highest in Hong Kong and Singapore, relative to the developed countries, while Hong Kong tax and social security deductions are lowest. Furthermore, real salary levels, combined with intrinsic considerations such as the quality of life, indicate that Canada and New Zealand are unattractive places for visiting/migrating academics, while Australia and the US are relatively attractive. We suggest that our findings could be of use to policy-makers and academic unions in salary negotiations, as well as academics making relocation decisions.
This paper investigates the degree of exchange rate pass-through for the selected Asian countries namely Malaysia, Thailand, Taiwan, and Singapore. Unlike past studies, this paper focuses on small open economies and includes exports of primary commodities in the investigation. We utilize cointegration techniques based on Engle and Granger (1987) and Johansen and Juselius (1990), and error correction modeling, to provide a more robust and rigorous investigation of the long run and short run pass-through of exchange rates. It is found that, in general, the degree of pass-through is high, although there is a small extent of pricing to market found for all countries. For Malaysia, the degree of pricing to market found suggests that there is intense competition in the export industries. In the case of Thailand, there is almost complete pass-through and this conforms to our a priori expectations. In the case of Singapore and Taiwan, we detect a higher degree of pass-through compared to past studies. For a country, the high degree of pass-through will support the adoption of more flexible exchange rate oriented monetary policies, and for firms it will reveal the limits of their price setting behavior amidst international competition.
This paper provides a descriptive analysis of broad features of major exchange rates since the early 1970s and compares these features with those of the 1960s. The analysis is then extended to investigate whether these features are manifested in interest rates and in commodity prices. The results indicate that while the exchange rates have become more volatile during the current floating rate regime, the moments are comparable with those for interest rates and commodity prices.
This paper will examine the validity of the purchasing power parity (PPP) hypothesis for the Thai baht vis‐à‐vis the currencies of Thailand's key trading partners under the new exchange rate regime using the cointegration technique. The major conclusions obtained from this empirical analysis may be broadly summarized as follows. First, the empirical evidence, based on the DF and ADF statistics, seems to suggest that the nominal exchange rates and relative prices are well characterized as non‐stationary I(1) processes. Second, the cointegration analysis provides no evidence in support of a long‐run equilibrium relationship between bilateral nominal exchange rates for the Thai baht vis‐à‐vis the currencies of Thailand's major trading partners and the corresponding relative price ratios. This implies rejection of PPP for these countries. If this is the case, considerable care should be taken in assessing the long‐run implications for the real exchange rate, and thus competitiveness against Thailand's key trading partners, of shocks to the nominal exchange rate.
This paper computes Divisia price and volume indices from quarterly data of New Zealand exchange rates and exports to analyse the relationship between New Zealand's domestic inflation and the changes in its exchange rates over the period 1983 - 93. Using four major export items and five major markets of New Zealand, the computed Divisia indices, as well as their variances, covariances and correlations, are analysed to check whether and to what extent the competitiveness of the selected exports were affected in the markets in question as a result of the price and exchange rate movements. The findings throw some interesting light on the relationships being investigated.
Principal component analysis (PCA) is introduced to construct a 'pooled' measure of inflation for the 12 euro countries. This measure is used to test the purchasing power parity condition for the euro against three major currencies, namely, those of the USA, UK and Japan. The test results are then used to measure the speed of adjustment of the deviations from PPP using rolling and recursive regressions procedures. Finally, the forecasting accuracy of the PPP-based euro exchange rates is compared with those given by the random walk model, and the synthetic euro series provided by the European Central Bank. In general, the results are supportive of PPP.
Many empirical studies have suggested that purchasing power parity (PPP) does not hold in the short run, and some conclude that PPP is not observed even in the long run. The recent collapse of the Mexican peso suggests otherwise, however. This study examines whether PPP has bound the nominal peso/dollar exchange rate and the Mexican and US price levels between 1920 and 1994. Given the long sample period,unit root tests were conducted taking structural breaks into account, but the variables were still found to contain unit roots. Cointegration tests confirm a relationship between the exchange rate and price levels, and an error correction model verifies that it has indeed been the PPP relationship that linked the variables. Deviations from PPP were corrected, on average, within four years. The confirmation of PPP during the period 1920-94 underscores the futility of Mexican policies that defied PPP in the early 1990s, after trade and capital flows were liberalized.
This paper utilises various recently developed econometric methods to obtain better approximations to the half-life for real exchange rates of ten South African Development Community (SADC) countries and to generate confidence intervals for half-life deviations from the purchasing power parity (PPP). The robust methods of Stock (1991), Elliott and Stock (2001), and Hansen (1999) imply that point estimates of less than 36 months exist, making them compatible with PPP. However, the results of ADF and ADF-GLS tests render the SADC real exchange rates as nonstationary processes, a result that is patently at odds with mean-reversion, implying at the same time the possibility of infinite half-lives. Therefore the empirical results appearing in this paper do not convincingly resolve the half-life version of the PPP puzzle and leaves room for future research in the directions of non-parametric methods and median unbiased confidence intervals.
This paper utilizes the dynamic error-correction model (DECM) to examine the issue of purchasing power parity (PPP) for 11 developing countries (Argentina, Bolivia, Colombia, Cote d'Ivoire, Ecuador, Guatemala, Kenya, Nigeria, Peru, South Africa, and Venezuela). For comparison purposes, evidence from the traditional unit root methods of the augmented Dickey-Fuller (ADF) and Phillips-Perron is presented. The results from the conventional unit root tests failed to find evidence of PPP in all of the cases. However, the results from the generalized error-correction model detected evidence of PPP for nine out of the 11 countries under consideration. Based on these results, it was concluded that PPP holds in the long-run for the sample countries and that the implicit restrictions associated with unit root tests prevented earlier studies from finding evidence in support of PPP theory.
In the course of PPP research, much of the debate over the validity has been over the choice of an appropriate ‘basket’ for making purchasing power comparisons. The different compositions of goods and services in these baskets across countries have resulted in arguments against their usefulness for PPP purposes. This problem is augmented by the existence of productivity differentials in traded and non-traded goods across countries. Therefore we consider the use of the Big Mac as the international monetary standard as being a more palatable alternative: It is produced locally in over 80 countries around the world, with only minor changes in recipe and thus has the flavour of ‘the perfect universal commodity’. Our results indicate that the Big Mac Index is surprisingly accurate in tracking exchange rates over the long-term, which is consistent with previous PPP research findings. We subsequently enhance our PPP comparisons by taking into account the productivity differentials between countries and excluding non-traded goods from the Big Mac Index to derive the No-Frills Index.
Much of the existing literature on currency substitution (CS) postulates that the international transmission of monetary shocks is facilitated rapidly by the linkages that exist between the national money markets under CS. This paper incorporates the CS possibility into an explicit macroeconomic model to show that, once currency substitution is considered within such a framework, the conclusions regarding its consequences may easily change: not only is the presence of CS irrelevant for determining whether policy-induced monetary disturbances are transmitted between countries, but it may actually help reduce the magnitude of the transmission effects.
In recent years, academic staff unions and associations have argued for higher salaries for academics on the grounds that existing salaries have not kept pace with inflation, are well below commercial salaries and, most glaringly, are much lower than the salaries of their overseas counterparts. However, most international comparisons are made based on exchange rate conversions, which is inappropriate since purchasing power differentials are only reflected in exchange rates in the long term. Furthermore, the volatility of exchange rates make such conversions highly inaccurate. A comparison is provided of real academic salaries by converting the nominal salaries in each country to their purchasing power equivalents, using the Big Mac Index. Our results show that real academic salaries are highest in Hong Kong and Singapore, relative to the developed countries, while Hong Kong tax and social security deductions are lowest. Furthermore, real salary levels, combined with intrinsic considerations such as the quality-of-life, indicate that Canada and New Zealand are unattractive places for visiting/migrating academics, while Australia and the USA are relatively attractive. It is suggested that these findings could be of use to policy-makers and academic unions in salary negotiations, as well as academics making relocation decisions.
This paper uses a new measure of real exchange rates as an indicator of international competitiveness. This new measure involves defining all prices and exchange rates on an appropriately weighted basket of currencies rather than a single currency. The measure is applied to the data for Japan, Korea, Thailand, Malaysia and Singapore. For comparison purposes, we calculate real exchange rates based on purchasing power parity (PPP) for these countries. To check for the relative performance of the two measures, cointegration tests are employed. The results indicate that the new measure tends to be closely related with the export growth for the sample countries, while the PPP-based measure is not. Moreover, the PPP-based real exchange rates tend to understate the measures of competitiveness for these countries. This result has important implications in terms of the levels of these countries' exchange rates as well as the well-known Balassa hypothesis.
Even prior to the extreme volatility just observed, output growth volatility-following protracted decline-was flattening or mildly rising in some countries. More widespread was an increasing tendency from the mid-1990s for shocks in one country to transmit rapidly to other countries, creating the potential for heightened global volatility. The higher sensitivity to foreign shocks, in turn, appears related to stepped-up vertical specialization associated with the integration of emerging markets in international trade. Increased international spillovers call for stronger ex post coordination mechanisms when shocks are large but the best ex ante prevention strategy probably is sensible national policies.
The existence of long-run purchasing power parity (PPP) implies that a cointegration vector of nominal exchange rate, domestic price, and foreign price is expected regardless of using the Engle-Granger two-step method or Johansen maximum likelihood approach. However, this paper has found conflicting results: the Engle-Granger technique tends to reject the long-run PPP hypothesis whereas the Johansen method is generally supportive of long-run PPP. Via Monte Carlo simulations, the present paper finds that the Johansen approach has a bias toward supporting long-run PPP especially under the circumstances in which the assumption of normally or/and independently and identically distributed disturbance terms is violated.
With the advent of flexible exchange rates, research into the foreign exchange expectation relation based on the purchasing power parity and interest rate parity conditions has shown that the speed of transmission of economic variables, such as the price level and interest rates, is not rapid enough to maintain parity in the short term with the foreign exchange market. The asset market approach to exchange rate determination is based on the notion that exchange rates, like asset prices, are driven by "news" or unanticipated announcements of changes in economic variables. We use this approach to investigate the validity of the international equity parity theory, i.e., the possibility of a distinct, short-term relationship between international equity and foreign exchange markets. Our results show that equity parity is achieved within a very short time, in some cases within a one-week period. Furthermore, consistent with previous research, we find evidence to support the existence of currency blocs. We suggest that these findings could have practical applications for international investors.
New methods are applied to the ASEAN data for the testing of purchasing power parity (PPP). Using a methodology based on Divisia index numbers, the results indicate that PPP does not work at all in the short run, but holds fairly well over a longer term for the ASEAN countries as a whole. This long-run result passes the tests based on recently developed time-series econometrics.
There are important price differences between Switzerland and EC countries in the examined product groups with the exception of cars, motorcycles and bicycles. The price differences are smaller within the EC than between EC and non member countries, confirming the assumption that economic integration leads to the convergence of national price levels. However, when comparing the eight countries under consideration, one notices that Italy rather than Switzerland comes last Being a member of the EC is therefore not synonymous with price convergence; other explanations have also to be taken into account.
This paper introduces new indexes of prices and quantities of world trade and demonstrates their link with real exchange rates. These indexes are applied to data from the Group of Seven countries.One of our results is that the elasticity of exports with respect to the real exchange rate is 0.4.
The failure of strict purchasing power parity to hold in the 1970s can be explained by the preponderance of the real shocks which involve large changes in sectoral relative prices. Previous work has attempted to measure these effects by using proxies for the prices of traded and nontraded goods. In this study the author uses the Divisia price variance as a measure of changes in the structure of relative prices to reexamine the case for real shocks causing deviations from parity. Using data from 21 OECD countries, the results show that an increase in the variance of relative prices at home (in relation to that abroad) depreciates the currency. Copyright 1991 by Blackwell Publishers Ltd/University of Adelaide and Flinders University of South Australia
Purchasing Power Parity (PPP) is a theory of exchange rate determination. It asserts (in the most common form) that the exchange rate change between two currencies over any period of time is determined by the change in the two countries’ relative price levels. Because the theory singles out price level changes as the overriding determinant of exchange rate movements it has also been called the ‘inflation theory of exchange rates’.
The first part of the paper traces the doctrinal origins of the purchasing power parity (PPP) doctrine and reviews the central issues of controversy. The second part is an empirical study covering the flexible exchange rates period of the 1920s. The empirical work examines the efficiency of foreign exchange markets, the absolute and the relative versions of PPP for alternative price indices, the homogeneity postulate, the relation between the short run and the long run, and the patterns of ‘causality’ between prices and exchange rates. The paper concludes with estimations of price equations and a discussion of the proper specification of PPP.
This model treats the exchange rate as an "asset price" that depends on expectations concerning exogenous real and monetary factors that will affect relative prices and absolute price levels in future periods. Changes in exchange rates reflect both expected changes in these exogenous factors and changes in expectations occasioned by new information. The model explains the random component in exchange rate behavior, the source of divergences from purchasing power parity, the anticipatory response of exchange rates to future expected disturbances, and the causes of exchange rate overshooting.
The purpose of this paper is to call attention to the need for a theory of comparative national price levels and to explore some of the elements that seem to belong to such a theory. Most theoretical discussions have maintained that national price levels tend towards equality and focus on presumably temporary divergences from equality. Yet strong evidence has been accumulating that there are large and long-standing differences inprice levels, the highest of which are more than twice those of countries with the lowest prices. Long-run price level differences are most clearly related to levels of real per capita output, with richer countries having higher price levels.These differences have been explained as resulting from greater advantages in productivity for the wealthier countries in goods production, mostly tradable, than in services production, mostly nontradable. The differences in relative productivity may be in total factor productivity or only in labor productivity, reflecting the greater capital intensity of goods production and possibly a higher elasticity of substitution between capital and labor in goods production.We find in the empirical analysis that a large part of the differences in price levels can be explained by structural factors such as real GDP per capita, the degree of openness of the economy, and the share of nontradable goods in output. The only non-structural factor emerging from a preliminary analysis of several of these was the rate of growth of the quantity of money.
This paper reviews and analyzes the empirical record of exchange rates and prices during the 1970's and the analysis is based on the experience of the Dollar/Pound, the Dollar/French Franc and the Dollar/DM exchange rates. Section 2 presents the evidence on PPP during the 1970's and contrasts it with the evidence from the 1920's -- a period during which the doctrine held up reasonably well. This analysis is relevant for assessing whether the flexible exchange rate system was successful in providing national economies with an added degree of insulation from foreign shocks, and whether it provided policymakers with an added instrument for the conduct of macroeconomic policy. The evidence regarding deviations from purchasing power parities is also relevant for determining whether there is a case for managed float. Section 3 attempts to explain what went wrong with the performance of the doctrine during the 1970's. It examines the hypothesis that the departures from PPP are a U.S. phenomenon, as well as the hypothesis that the departures are due to large changes in inter-sectoral relative price changes within the various economies. Given that the predictions of the simple versions of PPP do not hold up, section 4 proceeds in examining the question of whether national price levels have been independent of each other. Section 5 addresses the question of whether exchange rates and national price levels are comparable and whether in principle one should have expected them to be closely linked to each other. The main point that is being emphasized is that there is an important intrinsic difference between exchange rates and national price levels which stems from the basset market theory' of exchange rate determination. This theory implies that the exchange rate, like the prices of other assets, is much more sensitive to expectations concerning future events than national price levels and as a result, in periods which are dominated by news' which alter expectations, exchange rates are likely to be much more volatile than national price levels and departures from PPP are likely to be the rule rather than the exception. Finally, section 6 concludes the paper with some policy implications.
Value-at-Risk measures the potential loss on a portfolio, where the potential loss is linked directly to the probability of large, adverse movements in market prices. This paper considers four classes of Value-at-Risk model: variance-covariance models; historical-simulation models; Monte-Carlo simulation models; and extreme-value estimation models. Using portfolio data from all Australian banks over the past ten years, we compare the performance of specific implementations of each of the four Value-at-Risk model classes. Performance assessment is based on a range of measures that address the conservatism, accuracy and efficiency of each model.
This paper contributes empirically to our understanding of informed traders. It analyzes traders' characteristics in a foreign exchange electronic limit order market via anonymous trader identities. We use six indicators of informed trading in a cross-sectional multivariate approach to identify traders with high price impact. More information is conveyed by those traders' trades which--simultaneously--use medium-sized orders (practice stealth trading), have large trading volume, are located in a financial center, trade early in the trading session, at times of wide spreads and when the order book is thin.
The present paper is intended to accomplish two tasks. First, models predicting overshooting and magnification, respectively, will be checked for their consistency with two key empirical regularities: A. The observed pattern of price level vs. exchange-rate volatility. B. The observed pattern of spot exchange-rate vs. forward exchange-rate volatility. Second, a widely neglected reason for exchange-rate volatility, activist monetary policy, will be studied.
One curious fact to emerge from the return to flexible exchange rates in the 1970s was the failure of empirical tests of simple versions of the purchasing power parity (PPP) doctrine. This paper seeks to establish whether that observed poor performance of PPP can be attributed to uncertainty regarding the rate of inflation due to the large variations in relative prices experienced during the 1970s. The evidence is found to be unsupportive of the notion.
In a recent article of the European Economic Review, Frenkel (1981) claims that purchasing power parity (PPP) held farily well in the 1920s but collapsed in the 1970s. Frenkel's study does not include the Swiss case. The present paper aims to answer three questions: (1) to what extend does the evidence of the 1920s and the 1970s support PPP for Switzerland? (2) Is there a significant difference of price level and exchange rate behavior between the 1920s and the 1930s as claimed by Frenkel? and (3) is the Swiss experience significantly different from that of the countries.
This paper reviews and analyzes the empirical record of exchange rates and prices during the 1970's and the analysis is based on the experience of the Dollar/Pound, the Dollar/French Franc and the Dollar/DM exchange rates. Section 2 presents the evidence on PPP during the 1970's and contrasts it with the evidence from the 1920's -- a period during which the doctrine held up reasonably well. This analysis is relevant for assessing whether the flexible exchange rate system was successful in providing national economies with an added degree of insulation from foreign shocks, and whether it provided policymakers with an added instrument for the conduct of macroeconomic policy. The evidence regarding deviations from purchasing power parities is also relevant for determining whether there is a case for managed float. Section 3 attempts to explain what went wrong with the performance of the doctrine during the 1970's. It examines the hypothesis that the departures from PPP are a U.S. phenomenon, as well as the hypothesis that the departures are due to large changes in inter-sectoral relative price changes within the various economies. Given that the predictions of the simple versions of PPP do not hold up, section 4 proceeds in examining the question of whether national price levels have been independent of each other. Section 5 addresses the question of whether exchange rates and national price levels are comparable and whether in principle one should have expected them to be closely linked to each other. The main point that is being emphasized is that there is an important intrinsic difference between exchange rates and national price levels which stems from the basset market theory' of exchange rate determination. This theory implies that the exchange rate, like the prices of other assets, is much more sensitive to expectations concerning future events than national price levels and as a result, in periods which are dominated by news' which alter expectations, exchange rates are likely to be much more volatile than national price levels and departures from PPP are likely to be the rule rather than the exception. Finally, section 6 concludes the paper with some policy implications.Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.
This paper tests for the existence of long-run purchasing power parity (PPP) in the bilateral exchange rates of the United States, Canada, Japan, and several European countries. We do this by taking wage and price data for each of these countries and decomposing these data into a low-frequency trend (or long-run) component and a high-frequency noise component. The trends are then used in distributed lag regressions to test for PPP. We show that so long as U.S. data are used, PPP cannot be rejected. Using data from countries other than the United States leads to mixed results. /// La parité du pouvoir d'achat en longue période. Ce mémoire vérifie l'existence d'une parité du pouvoir d'achat en longue période dans les taux de change bilatéraux entre les Etats-Unis, le Japon et plusieurs pays européens. C'est fait en décomposant les séries de salaires et de prix de chacun de ces pays en une composante tendancielle à basse fréquence et une composante à haute fréquence associée à la notion de bruit. on utilise alors les composantes tendancielles dans des analyses de régression avec retards échelonnés pour vérifier l'existence de la parité du pouvoir d'achat. On montre qu'avec les données américaines, l'hypothèse ne peut être rejetée alors qu'avec les données des autres pays, on obtient des résultats mixtes.
The focus of the paper is on real exchange rates for the dollar over the period 1957 to 1985. Most such exchange rates followed an almost steplike pattern, showing relatively little movement in the late 1950s and 1960s, falling abruptly and then remaining low in the 1970s and finally in the 1980s rising back to levels close to those that prevailed initially. Contrary to much recent commentary, therefore, the period that appears different is not the last five years but the decade that preceded them. An important factor underlying this pattern of exchange-rate movement, according to results presented in the paper, was the behavior of monetary policy and, hence, inflation in the United States. What remains to be established is the precise mechanism linking money and real exchange rates and the (relative) strength of those links.
Students exposed to the pure theory of international trade have been seduced by visions of an imaginary world with few goods, each typically produced by several countries but nevertheless homogeneous. In the assumed absence of transport costs and trade restrictions, perfect commidty arbitrage insures that each good is uniformly priced (in common-currency units) throughout the world -- the "law of one price" prevails.
Flexible Exchange Rates in Historical Perspective Princeton Srudies in fnternationul FinanceWhy Services are Cheaper in Poorer Countries,' Economic Journnl
- P Bernholz
BERNHOLZ, P., 'Flexible Exchange Rates in Historical Perspective,' Princeton Srudies in fnternationul Finance, No. 49, July 1982. BHAGWATI, J., 'Why Services are Cheaper in Poorer Countries,' Economic Journnl. June 1984, 94: 279-286.
Toward an Explanation of National Price Levels Princeron Srrrclies in Internationnl Finunce
- I Kravis
- R And
- Lipsey
KRAVIS, I., AND R. LIPSEY, 'Toward an Explanation of National Price Levels,' Princeron Srrrclies in Internationnl Finunce, No. 52, Princeton University Press, 1983.
Purchasing Polver Parity ad Exchange Rnres
- L H Officer
OFFICER, L.H., Purchasing Polver Parity ad Exchange Rnres, Greenwich, Connecticut: JAI Press, 1984.