Economics, Econometrics and Finance
4 years ago

Real exchange rates found to be mean reverting, impacting global economies.

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RePEc: Research Papers in Economics
Are real exchange rates mean reverting? Evidence from a panel of OECD countries
Levent Korap

Paper Summary

Real exchange rates in OECD countries from 1987 to 2006 were studied to see if they tend to return to a long-term average. By using special tests on a group of countries, it was found that real exchange rates do not stay at the same level over time, supporting the idea of purchasing power parity. This means that exchange rates adjust to keep prices similar across countries.

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