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Title: |
The Short- and Long-Run Relationships between the Exchange Rate of the
Dollar and Producer Prices in the U.S. |
| Author: |
Nourzad,
Farrokh |
| Author
Affiliation: |
Marquette U |
| Source: |
International Economic Journal, Summer 1997, v. 11, no. 2, pp. 59-71 |
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Publication Date: |
Summer 1997 |
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Abstract: |
This paper investigates empirically the
relationship between exchange rates and producer prices in the U.S.
using a multivariate dynamic framework. Cointegration tests reveal that
there is a stable long-run relationship between prices, exchange rates
and other factors according to which depreciations lead to higher
prices. However, the estimated effect is not consistent with the pure
form of purchasing power parity hypothesis. It is also found that in the
short run, the rate at which the dollar depreciates does not exert a
discernible impact on the rate of price inflation. Finally, there
appears to be bi-directional causality between producer prices and
exchange rates. |
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