Title: The exchange-rate in the presence of transaction casts - implications for tests of purchasing power parity
Authors: Sercu, Piet ×
Uppal, R
Van Hulle, Cynthia #
Issue Date: Sep-1995
Publisher: Amer finance assn
Series Title: Journal of finance vol:50 issue:4 pages:1309-1319
Abstract: With transaction costs for trading goods, the nominal exchange rate moves within a band around the nominal purchasing power parity (PPP) value. We model the behavior of the band and of the exchange rate within the band. The model explains why there are below-unity slope coefficients in regression tests of PPP, and why these increase toward unity under hyperinflation or with low-frequency data. Our results are independent of the presence of nontraded goods in the economy.
ISSN: 0022-1082
Publication status: published
KU Leuven publication type: IT
Appears in Collections:Research Center International Finance, Leuven
Research Center Finance, Leuven
× corresponding author
# (joint) last author

Files in This Item:

There are no files associated with this item.

Request a copy


All items in Lirias are protected by copyright, with all rights reserved.

© Web of science