02068cas a2200253 a 4500 AALejournalIMF003097 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451855074 1018-5941 BD-DhAAL BD-DhAAL McDermott, C. Parity Reversion in Real Exchange Rates : Fast, Slow or Not At All? / C. McDermott, Paul Cashin. Washington, D.C. : International Monetary Fund, 2004. 1 online resource (43 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 Consensus estimates put the half-life of deviations from purchasing power parity (PPP) at about four years (Rogoff, 1996). However, conventional least squares estimates of half-lives are biased downward. Accordingly, as a preferred measure of the persistence of real exchange rate shocks, this study uses median-unbiased estimators of the half-life of deviations from parity, which correct for the downward bias of conventional estimators. The paper tests for PPP using real effective exchange rate data for 90 developed and developing countries in the post-Bretton Woods period. Support for PPP is found, as the majority of countries experience finite deviations of real exchange rates from parity. The speed of parity reversion is found to be typically much faster for developed countries than for developing countries, and to be considerably faster for countries with flexible nominal exchange rate regimes in comparison with countries having fixed nominal exchange rate regimes. Mode of access: Internet Cashin, Paul. IMF Working Papers; Working Paper ; No. 2004/128 Full text available on IMF http://elibrary.imf.org/view/journals/001/2004/128/001.2004.issue-128-en.xml IMF e-Library