Deviations of Exchange Rates From Purchasing Power Parity : A Story Featuring Two Monetary Unions

MacDonald, Ronald

We examine the mean-reverting properties of real exchange rates, by comparing the unit root properties of a group of international real exchange rates with two groups of intra-national real exchange rates. Strikingly, we find that while the international real rates taken as a group appear mean-reverting, the intra-national rates are not. This is consistent with the view that while monetary shocks may be mean-reverting over the medium term, underlying real factors do generate long-term trends in real exchange rates

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Year of publication:	1998
Authors:	MacDonald, Ronald
Other Persons:	MacDonald, Ronald (contributor) ; Bayoumi, Tamim A. (contributor)
Publisher:	Washington, D.C : International Monetary Fund
Subject:	Kaufkraftparität \| Purchasing power parity \| Wechselkurs \| Exchange rate \| Kanada \| Canada \| Schätzung \| Estimation \| Volatilität \| Volatility \| Regionaler Preisindex \| Regional price index \| Zeitreihenanalyse \| Time series analysis \| Währungsunion \| Monetary union