Post Bretton Woods deviations from purchasing power parity in G7 exchange rates - an empirical exploration

Article Abstract:

A study was conducted on G7 exchange rate deviations from purchasing power parity (PPP) since the demise of the Bretton Woods fixed exchange rate system. A model was constructed to incorporate traditional PPP and financial market variables and tested on the US dollar's six G7 exchange rates during the floating rate era. The results indicate that the divergent behavior of G7 exchange rates during the period can be explained by the model's common set of variables.

Dollar (United States), Purchasing power, Bretton Woods Conference, 1944

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Exchange rate mean reversion from real shocks within an intertemporal equilibrium model

Article Abstract:

A simple intertemporal open economy model with the elasticities approach to the current account was constructed to examine exchange rate mean reversion from real shocks. The model is based on the existence of non-traded goods. Furthermore, the model can generate partial or approximately complete mean reversion for the real exchange rate provided the innovations in output consist of permanent and temporary components.

Exchange Rates

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