Japan's Purchasing Power Parity Holds Strong in Long-Run, Impacting Exchange Rates
The study looked at whether the idea of purchasing power parity holds true in Japan. They used two methods to test this, finding that the real exchange rate tends to go back to its average in the long run. They also found a strong relationship between purchasing power parity and the real exchange rate in the long term, but not in the short term. The results show that purchasing power parity is valid in Japan over the long run, but not in the short run.