Has the Euro Shrunk the Band? Relative Purchasing Power Parity Convergence in a Currency Union*

Currency Valuation and Purchasing Power Parity

Convergence to Purchasing Power Parity at the Commencement of the Euro

We investigate convergence towards Purchasing Power Parity (PPP) within the Euro Zone and between the Euro Zone and its main partners using panel data methods. We find strong rejections of the unit root hypothesis, and therefore evidence of PPP, in the Euro Zone for different numeraire currencies, as well as in the Euro Zone plus the United States with the dollar as the numeraire currency, star...

The Purchasing Power Parity Debate

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 country. On the other hand, when we offer so and so much of our own money, we are actually offering a purchasing power as against commodities and services in our own country. Our valuation of a foreig...

Nonlinear Adjustment Towards Purchasing Power Parity

Testing the Purchasing Power Parity in Pooled

In this paper we test the purchasing power parity for the post Bretton Woods period for 18 main industrial countries. As base currencies we use alternatively the Deutsche mark, the Japanese yen, and the US dollar. We employ error correction models for single countries and on the level of pooled equations allowing eecient inference on domestic and foreign price elasticities of nominal exchange r...