Arbeitspapier
A Bayesian Analysis of the PPP Puzzle using an Unobserved Components Model
The failure to describe the time series behaviour of most realexchange rates as temporary deviations from fixedlong-term means may be due to time variation of the equilibriathemselves, see Engel (2000). We implement thisidea using an unobserved components model and decompose theobservations on real exchange rates in long-termcomponents, which capture the time-variation of the mean and inmedium and short-term components whichmeasure temporary deviations. A simulation-based Bayesian analysis isintroduced to compute the posteriordistribution of (functions) of the model parameters. A stationaritytest in this setup indicates that the mean isslowly time-varying. Subsequently, we use our flexible model toderive the implied distributions of some keyfeatures of real exchange rates. Most notably, the half-life ofdeviations from the mean, which is a measure ofpersistence, is lowered. This provides a possible explanation for thePPP puzzle.
- Sprache
-
Englisch
- Erschienen in
-
Series: Tinbergen Institute Discussion Paper ; No. 01-105/4
- Klassifikation
-
Wirtschaft
Bayesian Analysis: General
Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
Model Evaluation, Validation, and Selection
International Finance: General
- Thema
-
purchasing power parity puzzle
real exchange rate
time-varying mean
Gibbs sampling
Kaufkraftparität
Bayes-Statistik
Theorie
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Kleijn, Richard
van Dijk, Herman K.
- Ereignis
-
Veröffentlichung
- (wer)
-
Tinbergen Institute
- (wo)
-
Amsterdam and Rotterdam
- (wann)
-
2001
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:43 MEZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- Kleijn, Richard
- van Dijk, Herman K.
- Tinbergen Institute
Entstanden
- 2001
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