01896cas a2200253 a 4500 AALejournalIMF001797 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451859966 1018-5941 BD-DhAAL BD-DhAAL McDermott, C. An Unbiased Appraisal of Purchasing Power Parity / C. McDermott, Paul Cashin. Washington, D.C. : International Monetary Fund, 2001. 1 online resource (35 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students Univariate studies of the hypothesis of unit roots in real exchange rates have yielded consensus point estimates of the half-life of deviations from purchasing power parity of between three to five years. However, least squares-based estimates of half-lives are biased downward. Accordingly, we follow Andrews (1993) and use median-unbiased estimators of the half-life of deviations from parity as a preferred measure of the persistence of real exchange rate shocks. We study this issue using real effective exchange rate (REER) data for 22 industrial countries in the post-Bretton Woods period. Three methods of bias correction are implemented, which yield cross-country averages of half-lives of deviations from parity ranging between 4 to 15 years, with the REER of several countries displaying permanent deviations from parity. Mode of access: Internet Cashin, Paul. IMF Working Papers; Working Paper ; No. 2001/196 Full text available on IMF http://elibrary.imf.org/view/journals/001/2001/196/001.2001.issue-196-en.xml IMF e-Library