Researchers have long been vexed by the persistence of real exchange rate deviations from linear-form PPP. Two of the more popular explanations involve the role of supply shocks to the exchange rate, for instance as captured by the Harrod-Balassa-Samuelson (HBS) hypothesis that emphasizes the...

This article empirically models China's stock prices using conventional fundamentals: corporate earnings, risk-free interest rate and a proxy for equity risk premium. It uses the estimated long-run stock price misalignments to date booms and busts, and analyses equity market reforms and excess...