New Evidence Challenges Traditional Currency Exchange Rates, Impacting Global Economies
The study looked at the Purchasing Power Parity (PPP) for 16 OECD countries using different tests. They found that real exchange rates are not stable, which goes against the PPP idea. However, when they considered two breaks in the tests, they found that real exchange rates are stable for most countries. Overall, the study supports the idea of PPP when using specific tests with two breaks.