Have the constraints on PPP relaxed over time? Some evidence from Japan

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A standard model with transportation costs implies that real exchange rates should follow a band threshold model where the process is a random walk within the bands and mean-reverting outside them. Because of technological improvements, these bands should narrow over time. The evidence indicates that such a feature is not supported by the data, casting doubts on the relevance of such models to describe the behavior of exchange rates.

Original languageEnglish
Pages (from-to)205-210
Number of pages6
JournalEconomics Letters
Issue number2
Publication statusPublished - 2004 Aug
Externally publishedYes



  • Market integration
  • Real exchange rates
  • TAR

ASJC Scopus subject areas

  • Economics and Econometrics
  • Finance

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