PPP in the medium run: The case of Norway |
| |
Authors: | Q Farooq Akram |
| |
Institution: | aResearch Department, Norges Bank, P.O. Box 1179 Sentrum, 0107 Oslo, Norway |
| |
Abstract: | Existing studies generally reject purchasing power parity (PPP) on data sets from countries that have been affected by large real shocks, including Norway. However, we offer strong evidence of PPP between Norway and its trading partners during the post-Bretton Woods period, in which the Norwegian economy has experienced numerous real shocks such as discoveries of large petroleum reserves and oil price shocks. In particular, the behavior of the Norwegian real and nominal exchange rates appears remarkably consistent with the PPP theory. Moreover, convergence towards PPP is relatively rapid; the half-life of a deviation from parity is just about 1.5 years. We show that such deviations are primarily eliminated by adjustments in the nominal exchange rate and we offer some explanations for the relatively rapid convergence towards PPP. |
| |
Keywords: | PPP Real exchange rate Econometric analysis |
本文献已被 ScienceDirect 等数据库收录! |
|