Long-Run Exchange Rate Dynamics: A Panel Data Study

Author/Editor:

Karl F Habermeier ; Mario M Mesquita

Publication Date:

April 1, 1999

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

Long-run movements of real exchange rates are studied using a panel data set comprising 51 economies. The purchasing power parity hypothesis (PPP) is examined first using unit root tests. It is found that PPP does not hold for the full sample of countries, but it may hold for the advanced economies, as well as open and high-inflation economies. Using the recently developed mean group and pooled mean group estimators, the paper finds support for the Balassa-Samuelson hypothesis in both advanced and developing economies; and for the influence of shifts in the terms of trade.

Series:

Working Paper No. 1999/050

Subject:

Exchange rates Foreign exchange Inflation International trade Nominal effective exchange rate Prices Purchasing power parity Real exchange rates Terms of trade

English

Publication Date:

April 1, 1999

ISBN/ISSN:

9781451846959/1018-5941

Stock No:

WPIEA0501999

Pages:

25

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