Discrepancies between Purchasing Power Parities and Exchange Rates under the Law of One Price: A Puzzle (partly) Explained?

By: Podkaminer, Leon.

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BookSeries: wiiw Working Papers: 69Publisher: Wien : Wiener Institut für Internationale Wirtschaftsvergleiche (wiiw), 2010Description: 18 S., 5 Tables, 30cm.Subject(s): Purchasing Power Parity | exchange rate | PPP/ER discrepancy | Law of One Price | Balassa-Samuelson Effect | trade integration | computable general equilibrium | cross-country systems of demand functions | Almost Ideal Demand System | tradable goods | non-tradable goodsCountries covered: European Unionwiiw Research Areas: Macroeconomic Analysis and PolicyClassification: F11 | F15 | D12 | D58 | F31 | O57 Online resources: Click here to access online Summary: European Comparison Project data (years 1999-2008) are used for an estimation of cross-country systems (AIDS) of consumer demand functions defined over durable and non-durable tradable goods and non-tradable services. General exchange equilibrium models of inter-EU trade generate equalized relative prices of tradable goods. But domestic relative prices of services become more dispersed and can move the PPP/ER ratios away from unity. PPP/ER discrepancies may be sustained even when there are no impediments to free trade.

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Item type	Current library	Call number	Status	Date due	Barcode
Paper	WIIW Library	5.700/69 (Browse shelf(Opens below))	Available		1000010002200

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European Comparison Project data (years 1999-2008) are used for an estimation of cross-country systems (AIDS) of consumer demand functions defined over durable and non-durable tradable goods and non-tradable services. General exchange equilibrium models of inter-EU trade generate equalized relative prices of tradable goods. But domestic relative prices of services become more dispersed and can move the PPP/ER ratios away from unity. PPP/ER discrepancies may be sustained even when there are no impediments to free trade.

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