Exchange Rates Drive Global Economic Stability, Proving Purchasing Power Parity
The article examines whether the idea of purchasing power parity (PPP) holds true by studying exchange rates of 18 currencies. They use tests that don't assume a specific type of adjustment and find that 11 currencies show non-linear patterns in returning to PPP. Their analysis suggests that exchange rates play a bigger role than prices in correcting deviations from PPP, supporting the idea that PPP is a real phenomenon.