01782cas a2200277 a 4500 AALejournalIMF002337 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451849011 1018-5941 BD-DhAAL BD-DhAAL Mumtaz, Haroon. PPP Strikes Back : Aggregation and the Real Exchange Rate / Haroon Mumtaz, Jean Imbs, Morten Ravn, Helene Rey. Washington, D.C. : International Monetary Fund, 2003. 1 online resource (42 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 We show the importance of a dynamic aggregation bias in accounting for the PPP puzzle. We prove that established time-series and panel methods substantially exaggerate the persistence of real exchange rates because of heterogeneity in the dynamics of disaggregated relative prices. When heterogeneity is properly taken into account, estimates of the real exchange rate half-life fall dramatically, to little more than one year, or significantly below Rogoff's "consensus view" of three to five years. We show that corrected estimates are consistent with plausible nominal rigidities, thus, arguably, solving the PPP puzzle. Mode of access: Internet Imbs, Jean. Ravn, Morten. Rey, Helene. IMF Working Papers; Working Paper ; No. 2003/068 Full text available on IMF http://elibrary.imf.org/view/journals/001/2003/068/001.2003.issue-068-en.xml IMF e-Library