The term Purchasing Power Parity may date from the early twentieth century, when it was coined by the Swedish economist Gustav Cassel, but the underlying concept had been enjoying varying degrees of success since its development in sixteenth century Spain. Even towards the end of the twentieth century, and especially since the breakdown of the Bretton Woods system of fixed exchange rates, PPP and the stability of real exchange rates continued to be the subject of academic debate.

This volume brings together essays covering aspects of current thinking on Purchasing Power Parity, from the various ways in which to test for its existence, to its appearance in different economies around the world, to examinations of the explanations given when PPP does not appear to hold

This book was published as a special issue of Applied Financial Economics. The academic editor of this journal is Mark P. Taylor.

Contents

1. Real exchange rates and Purchasing Power Parity: mean-reversion in economic thought Mark P. Taylor 2. A simple test for PPP among traded goods Philip Hans Franses and Dick van Dijk 3. Testing for Purchasing Power Parity using stationary covariates Jomana Amara and David H. Papell 4. Explaining the persistence of deviations from PPP: a non-linear Harrod-Balassa-Samuelson effect? Michael Sager 5. Testing for symmetry and proportionality in a European panel Jerry Coakley and Stuart Snaith 6. Panel data tests of PPP: a critical overview Guglielmo Maria Caporale and Mario Cerrato 7. PPP: a disaggregated view Christoph Fischer 8. Purchasing Power Parity as a long-term memory process: evidence from Canada Jean-Francois Villeneuve and Jagdish Handa 9. The Purchasing Power Parity puzzle: a sudden nonlinear perspective Marcus Lahtinen 10. Exchange rate misalignment: a new test of long-run PPP based on cross-country data Pan A. Yotopoulos and Yasuyuki Sawada 11. Purchasing Power Parity in economies in transition: evidence from Central and East European countrierios Sideris 12. A century of Purchasing Power Parity: evidence from Canada and Australia Mohammad S. Hasan 13. Purchasing Power Parity versus the EU in the Mediterranean countries Mariam Camarero, Juan Carlos Cuestas and Javier Ordez 14. Purchasing Power Parity and real exchange rate behaviour in Africa Joseph M. Kargbo 15. Structural changes and deviations from the Purchasing Power Parity within the euro area Daniele Antonucci and Alessandro Girardi 16. The real exchange rate and the Purchasing Power Parity puzzle: further evidence Sofiane H. Sekioua and Menelaos Karanasos

Author Bio

Mark Taylor is a leading international authority on open economy macroeconomics and international finance. He is Professor of International Finance and Macroeconomics at Warwick and a Managing Director of Barclays Global Investors (BGI).