Intra-National, Intra-Continental, and Intra-Planetary PPP / Charles Engel, Michael K. Hendrickson, John H. Rogers.

Format:

Book

Author/Creator:

Engel, Charles.

Contributor:

National Bureau of Economic Research.

Hendrickson, Michael K.

Rogers, John H.

Series:

Working Paper Series (National Bureau of Economic Research) no. w6069.

NBER working paper series no. w6069

Language:

English

Subjects (All):

Foreign exchange rates--Econometric models.

Foreign exchange rates.

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1997.

Cambridge : National Bureau of Economic Research, 1997.

Summary:

This paper builds a model of adjustment toward PPP for a panel of real exchange rates. The model eliminates some inconsistencies in previous models, which implied a model for the real exchange rate of country B relative to country C that was not commensurate with the posited model of the real exchange rate for A relative to B, and A relative to C. The model allows us to handle correlations across exchange rates in a panel in a natural way. We put restrictions on an underlying model which yields a simple covariance matrix that can be easily estimated by GLS methods. We also put restrictions on the underlying model which allow us to easily estimate a panel PPP model in which the speed of adjustment is not the same for all real exchange rates. Our model, applied to the price levels of eight cities in four countries and two continents, does not find evidence in favor of reversion of PPP.

Notes:

Print version record

June 1997.