Purchasing Power Parity Theory And Empirical Evidence
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Author | : Marc Munzer |
Publisher | : GRIN Verlag |
Total Pages | : 16 |
Release | : 2009-08-19 |
Genre | : Business & Economics |
ISBN | : 364040470X |
Seminar paper from the year 2009 in the subject Business economics - Investment and Finance, grade: 1,3, University of Hull, language: English, abstract: The Swedish economist Gustav Cassel developed his theory of Purchasing Power Parity (henceforth PPP) more than 80 years. Ago, and today it is still an essential part of the framework for forecasting exchange rates, which includes parity conditions in international finance. International parity conditions imply purchasing power parity, the Fisher effect, the interest rate parity theory and the expectations theory. “They are the set of equilibrium relationships which should hold between product prices, interest rates, and spot and forward exchange rates assuming a freely floating exchange system.” (Demirag and Goddard, 1994, 70) Unfortunately, these theories do not always work out in reality, especially in times of financial crisis. However, they give us a central understanding of how and why multinational business is related in the world. Sometimes, “the mistake is not always in the theory itself, but in the way it is interpreted or applied in practice” (Eitemann et.al., 2004, 133). This essay will take a detailed look at PPP, its theoretical perspective, and the empirical evidence for it. [...]
Author | : Ke Qi Zhang |
Publisher | : |
Total Pages | : |
Release | : 2006 |
Genre | : |
ISBN | : |
Author | : Razzaque H. Bhatti |
Publisher | : Springer |
Total Pages | : 389 |
Release | : 2016-07-27 |
Genre | : Business & Economics |
ISBN | : 1349255238 |
This book presents an extensive survey of the theory and empirics of international parity conditions which are critical to our understanding of the linkages between world markets and the movement of interest and exchange rates across countries. The book falls into three parts dealing with the theory, methods of econometric testing and existing empirical evidence. Although it is intended to provide a consensus view on the subject, the authors also make some controversial propositions, particularly on the purchasing power parity conditions.
Author | : |
Publisher | : |
Total Pages | : 1889 |
Release | : 1982 |
Genre | : |
ISBN | : |
Author | : Lawrence H. Officer |
Publisher | : Greenwich, Conn. : JAI Press |
Total Pages | : 394 |
Release | : 1982 |
Genre | : Business & Economics |
ISBN | : |
Evolution of PPP theory; Modern PPP theory and practice; Selected PPP studies.
Author | : Alina Ignatiuk |
Publisher | : GRIN Verlag |
Total Pages | : 69 |
Release | : 2009-04 |
Genre | : Business & Economics |
ISBN | : 3640305884 |
Seminar paper from the year 2008 in the subject Business economics - Miscellaneous, grade: A, Schmalkalden University of Applied Sciences (Schmalkalden University), language: English, abstract: "Under the skin of any international economist lies a deep-seated belief in some variant of the PPP theory of the exchange rate." The purpose of this paper is to consider one of the most controversial theory in international economics - Purchasing Power Parity theory - its main idea, empirical evidence, limitations and practical application. The main idea of PPP is price levels changes determine the exchange rate change between two countries. There are two versions of PPP theory absolute and relative. Stricter absolute version of PPP did not find confirmation in reality and relative version of PPP theory was proposed. Despite theoretical and practical inconformity, PPP is present in many models of international economics as an explanation of exchange rate changes. The main apologist of PPP theory and its father was Gustav Cassel. He indicated that the exchange rate determined by price levels is not necessarily the actual exchange rate but the equilibrium one. Also Cassel mentioned that there is a tendency for the actual exchange rate to return to its equilibrium exchange rate. The original idea of PPP theory is described below: "Our willingness to pay a certain price for foreign money must ultimately and essentially be due to the fact that this money possesses a purchasing power as against commodities and services in that foreign country." In this paper we considered the principle and two versions of PPP theory, discussed its empirical evidence and econometrical tests, and also tried to find possible reasons why PPP theory fails in reality and answered the question is this theory still useful for explaining exchange rates movements.
Author | : Claus Wihlborg |
Publisher | : |
Total Pages | : 64 |
Release | : 1978 |
Genre | : Foreign exchange |
ISBN | : |
Author | : María Pérez Jurado |
Publisher | : |
Total Pages | : 50 |
Release | : 1993 |
Genre | : Purchasing power parity |
ISBN | : 9788477932505 |
Author | : Jakub Witold Wiśniewski |
Publisher | : LAP Lambert Academic Publishing |
Total Pages | : 76 |
Release | : 2014-07-24 |
Genre | : |
ISBN | : 9783659572340 |
This paper is focused on the theory of purchasing power parity and presents its special place in the world of economic thought. Particular attention was paid to the possible reasons for deviations from the relationship determined by the parity and to the theoretical explanation of this phenomenon. The formal empirical verification is based on econometric tools that allow the study of the phenomenon of the co-integration of rates as well as of prices and the stationarity of real exchange rates. The survey was conducted on the basis of quarterly data taken from the 'OECD Statistical Compendium 2009' database for the years 1970-2009. The considerations of the issue end with the interpretation of the research outcome in the context of analyses published in the world literature.
Author | : Robert Privat Yuyuenyongwatana |
Publisher | : |
Total Pages | : 74 |
Release | : 1988 |
Genre | : |
ISBN | : |