G2TT
来源类型Working Paper
规范类型报告
DOI10.3386/w21979
来源IDWorking Paper 21979
Conditional PPP and Real Exchange Rate Convergence in the Euro Area
Paul R. Bergin; Reuven Glick; Jyh-Lin Wu
发表日期2016-02-15
出版年2016
语种英语
摘要While economic theory highlights the usefulness of flexible exchange rates in promoting adjustment in international relative prices, flexible exchange rates also can be a source of destabilizing shocks. We find that when countries joining the euro currency union abandoned their national exchange rates, the adjustment of real exchange rates toward purchasing power parity (PPP) became faster. To disentangle the possible causes for this finding we develop a novel methodology for conducting counterfactual simulations of an estimated VECM that distinguishes between the roles of the nominal exchange rate as an adjustment mechanism and as a source of shocks. We find evidence that prior to joining the euro currency union, member countries relied upon exchange rate adjustments as a mechanism to correct for PPP deviations arising from divergent domestic inflation rates. But the loss of the exchange rate as an adjustment mechanism after the introduction of the euro was more than compensated by the elimination of the exchange rate as a source of shocks, in combination with faster adjustment in national price indices. These findings support claims that flexible exchange rates are not necessary to promote long-run international relative price adjustment.
主题International Economics ; Trade ; International Finance
URLhttps://www.nber.org/papers/w21979
来源智库National Bureau of Economic Research (United States)
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条目标识符http://119.78.100.153/handle/2XGU8XDN/579653
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GB/T 7714
Paul R. Bergin,Reuven Glick,Jyh-Lin Wu. Conditional PPP and Real Exchange Rate Convergence in the Euro Area. 2016.
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