Convergence Rates to Purchasing Power Parity for Traded and Nontraded Goods

A Structural Error-Correction Model Approach

Bibliographic Data

ID19417836
AuthorsJaebeom Kim (0000-0002-7711-2532, University of St. Thomas - Minnesota, corresponding author)
Year2005
Volume23
Issue1
Pages76-86
Publication date2005-01-01
Open AccessNo
TypeARTICLE
VenueJournal of Business and Economic Statistics (JOURNAL)
Journal identifiersISSN: 0735-0015 • E-ISSN: 1537-2707
PublisherInforma UK Limited (PUBLISHER • GB)
DOI10.1198/073500104000000226
OpenAlexW1983939966
LanguageEN
References cited23

This article estimates the speed of the adjustment coefficient in structural error-correction models. We use a system method for real exchange rates of traded and nontraded goods by combining a single-equation method with Hansen and Sargent's instrumental variables methods for linear rational expectations models. We apply these methods to a modified version of Mussa's model. Our results show that the half-lives of purchasing power parity deviations for the rates of traded goods are less than 1 year and are shorter than those for general price and for nontraded goods in most cases, implying a faster adjustment speed to parity

Econometrics · Economics · Exchange rate · Explanatory power · Law of one price · Macroeconomics · Price level · Purchasing power parity · Relative purchasing power parity · Economic theories and models · Market Dynamics and Volatility · Monetary Policy and Economic Impact

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