Open Economies Review

, Volume 18, Issue 4, pp 389–404 | Cite as

Disaggregate Real Exchange Rate Behaviour

  • Giorgio Fazio
  • Peter McAdam
  • Ronald MacDonaldEmail author


In this paper, we re-examine the “PPP Puzzle” using sectoral disaggregated data. Specifically, we first analyse the mean reversion speeds of real exchange rates for a number of different sectors in 11 industrial economies and then focus on relating these rates to variables identified in the literature as key determinants of CPI-based real exchange rates, namely: the trade balance, productivity and the mark up. In particular, we seek to understand to what extent the relationships existing at the aggregate level are borne out at the disaggregate level. We believe that this analysis can help shed light on the PPP puzzle.


Real exchange rates Sectoral prices Panel data methods 

JEL Classification

F31 F41 C33 


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Copyright information

© Springer Science+Business Media, LLC 2007

Authors and Affiliations

  1. 1.Università degli Studi di PalermoPalermoItaly
  2. 2.European Central BankFrankfurtGermany
  3. 3.Department of EconomicsUniversity of GlasgowGlasgowUK

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