Exchange rate uncertainty and deviations from Purchasing\ud Power Parity: evidence from the G7 area
- Publisher: Cardiff University
Arghyrou, Gregoriou and Pourpourides (2009) argue that exchange rate uncertainty causes deviations from the law of one price. We test this hypothesis on aggregate data from the G7-area. We find that exchange rate uncertainty explains to a significant degree deviations from Purchasing Power Parity.
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