The Law of One Price and the Purchase Power Parity theory: a review
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Título
The Law of One Price and the Purchase Power Parity theory: a reviewAutoría
Tutor/Supervisor; Universidad.Departamento
Russo, Alberto; Jaramillo Gutiérrez, Ainhoa; Universitat Jaume I. Departament d'EconomiaFecha de publicación
2021-06-15Editor
Universitat Jaume IResumen
Purchasing Power Parity (PPP) is a theory according to which the price of a same
basket of goods in different countries expressed in a common currency should be
equalized, at least in the long run and in the absence ... [+]
Purchasing Power Parity (PPP) is a theory according to which the price of a same
basket of goods in different countries expressed in a common currency should be
equalized, at least in the long run and in the absence of transportation costs and other
frictions. This theory is used to make predictions on what the value of the nominal
exchange rate should be in the future (equal to the ratio of price levels), thus allowing
to estimate by how much a currency is currently under- or over-valued, and to make a
prediction on the currency’ future appreciation or depreciation. Another implication of
the PPP theory is the following: if converted in a foreign currency at the nominal
exchange rate calculated according to the PPP, a unit of the domestic currency should
have the same purchasing power in the foreign country. The nominal exchange rates
implied by PPP then can be used to convert the real GDP of different countries in a
common currency (for example, the U.S. dollar), making the standard of living of these
countries comparable. The objective of this thesis is to present a review of the studies
that empirically test whether this theory matches the reality [-]
Palabras clave / Materias
Descripción
Treball Final de Grau en Economia. Codi: EC1049. Curs acadèmic: 2020/2021
Tipo de documento
info:eu-repo/semantics/bachelorThesisDerechos de acceso
info:eu-repo/semantics/openAccess
Aparece en las colecciones
- Grau en Economia [289]