Internal Relative Price Stationarity in Long-Run Purchasing Power Parity |
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Authors: | Janice Boucher Breuer & Alston Flynn Lippert |
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Institution: | University of South Carolina, Columbia, SC 29208, USA,;Villanova University, Villanova, PA 19805, USA |
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Abstract: | This study demonstrates that the joint relationship among domestic traded-goods prices, dometic nontraded-goods prices, foreign traded-goods prices, and foreign nontraded-goods prices is important to understanding rejections or confirmations of long-run PPP. This joint relationship is defined as the "cross-country internal relative price structure." For nine of the ten pairs of countries studied, the cross-country internal relative price structure is found to be stationary; thus, factors other than the influence of nontraded-goods prices must be responsible for the rejections of long-run PPP. |
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