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Purchasing Power Parity in the Long Run
Abstract
This paper re‐examines the evidence on Purchasing Power Parity (PPP) in the long run. Previous studies have generally been unable to reject the hypothesis that the real exchange rate follows a random walk. If true, this implies that PPP does not hold. In contrast, this paper casts serious doubt on this random walk hypothesis. The results follow from more powerful estimation techniques, applied in a multilateral framework. Deviations from PPP, while substantial in the short run, appear to take about three years to be reduced in half.
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Citations
Cited by
Unit root tests for panel data
Choi, I. (2001) · Journal of International Money and Finance · doi:10.1016/s0261-5606(00)00048-6 · Cited by 4,113
The overvaluation of purchasing power parity
O'Connell, P. G. J. (1998) · Journal of International Economics · doi:10.1016/s0022-1996(97)00017-2 · Cited by 1,207
A panel project on purchasing power parity: Mean reversion within and between countries
Frankel, J. A., & Rose, A. K. (1996) · Journal of International Economics · doi:10.1016/0022-1996(95)01396-2 · Cited by 678
PPP Strikes Back: Aggregation And the Real Exchange Rate
Imbs, J., Mumtaz, H., Ravn, M. O., & Rey, H. (2005) · The Quarterly Journal of Economics · doi:10.1162/0033553053327524 · Cited by 470
A Century of Purchasing-Power Parity
Taylor, A. M. (2002) · Review of Economics and Statistics · doi:10.1162/003465302317331973 · Cited by 423
Metadata
- Authors
- ABUAF, N., & JORION, P.
- Venue
- The Journal of Finance
- Publisher
- Wiley
- Published
- 1990-03
- Volume
- 45
- Issue
- 1
- Pages
- 157-174
- ISSN
- 0022-1082 (ISSN-L)
- 1540-6261
- OpenAlex
- W3121888640
- Cited by
- 803
- References
- 0
- FWCI
- 31.25
- Type
- journal article
- Language
- en
- Open access
- closed
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- CoChat. (2026). Citation check: Purchasing Power Parity in the Long Run. https://app.cochat.ai/papers/10.1111/j.1540-6261.1990.tb05085.x
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- ABUAF, N., & JORION, P. (1990). Purchasing Power Parity in the Long Run. The Journal of Finance. https://doi.org/10.1111/j.1540-6261.1990.tb05085.x
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Bibliographic data: Semantic Scholar, OpenAlex, Crossref.
Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
Semantic Scholar’s data is described in: Kinney, R., et al. (2023). The Semantic Scholar Open Data Platform. arXiv:2301.10140.
