Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/213538
Authors: 
Razzak, Weshah A.
Year of Publication: 
2018
Series/Report no.: 
EERI Research Paper Series 05/2018
Abstract: 
We show that the Purchasing Power Parity (PPP) puzzle, whereby the half-life of the shock to the real exchange rate is long and unjustifiable by monetary and financial shocks, is a result of specification and estimation issues. We provide an alternative specification for PPP and show that the half-life of the shock could be as short as 6.8 months and as long as 2 years, which is considerably shorter than what have been reported in the literature.
Subjects: 
PPP
unit root
half-life of shocks
JEL: 
C13
C18
F31
Document Type: 
Working Paper

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