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This paper tests the concept of general relative purchasing power parity (PPP), which posits a long-run unit elasticity of nominal exchange rates with respect to relative national prices, accommodating permanent real exchange rate shocks. Using a robust econometric framework and panel data from both industrialized and developing countries, the authors find that inflation differentials are reflected one-for-one in long-run nominal exchange rate depreciation, thereby supporting the validity of general relativ
- Author
- rasimebilli
- Language
- EN