Chong, Yanping; Jordà, Òscar; Taylor, Alan M. - C.E.P.R. Discussion Papers - 2010
Frictionless, perfectly competitive traded-goods markets justify thinking of purchasing power parity (PPP) as the main driver of exchange rates in the long-run. But differences in the traded/non-traded sectors of economies tend to be persistent and affect movements in local price levels in ways...