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• W3123961275 abstract "We study the purchasing power parity (PPP) puzzle in a multisector, two-country, sticky-price model. Sectors differ in the extent of price stickiness, leading to heterogeneous sectoral real exchange rate dynamics. Deviations from PPP are more volatile and persistent than in an otherwise identical one-sector world economy with the same average frequency of price changes. Under the empirical distribution of price stickiness of the US economy, the model produces PPP deviations with a half-life of 39 months. We provide a structural interpretation of the approaches found in the empirical literature on aggregation and PPP, and reconcile its apparently conflicting findings. (JEL F31, G31)" @default.
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• W3123961275 date "2011-10-01" @default.
• W3123961275 modified "2023-09-25" @default.
• W3123961275 title "Aggregation and the PPP Puzzle in a Sticky-Price Model" @default.
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• W3123961275 doi "https://doi.org/10.1257/aer.101.6.2391" @default.
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