Replication data for: Aggregation and the PPP Puzzle in a Sticky-Price Model
Principal Investigator(s): View help for Principal Investigator(s) Carlos Carvalho; Fernanda Nechio
Version: View help for Version V1
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Project Citation:
Carvalho, Carlos, and Nechio, Fernanda. Replication data for: Aggregation and the PPP Puzzle in a Sticky-Price Model. Nashville, TN: American Economic Association [publisher], 2011. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2019-10-11. https://doi.org/10.3886/E112459V1
Project Description
Summary:
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We study the purchasing power parity (PPP) puzzle in a multisector, two-country, sticky-price model. Sectors differ in the extent of price stickiness, leading to heterogeneous sectoral real exchange rate dynamics. Deviations from PPP are more volatile and persistent than in an otherwise identical one-sector world economy with the same average frequency of price changes. Under the empirical distribution of price stickiness of the US economy, the model produces PPP deviations with a half-life of 39 months. We provide a structural interpretation of the approaches found in the empirical literature on aggregation and PPP, and reconcile its apparently conflicting findings. (JEL F31, G31)
Scope of Project
JEL Classification:
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F31 Foreign Exchange
G31 Capital Budgeting; Fixed Investment and Inventory Studies; Capacity
F31 Foreign Exchange
G31 Capital Budgeting; Fixed Investment and Inventory Studies; Capacity
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