Skip to main content
SpringerLink
Log in

Parity Reversion in Real Exchange Rates: A Puzzle or a Nonissue?

  • Published:
IMF Staff Papers Aims and scope Submit manuscript

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Notes

  1. This is by no means an original observation. It is found as a common theme in the international economic literature of the 1920s and 1930s, as part of the rejection of Cassel’s more extreme versions of purchasing power parity. See, for example, Angell (1922), Terborgh (1926), and Viner (1937). A citation from Viner (p. 385): “But the divergences between actual exchange rates and those required by the purchasing power parity formula are in fact frequently substantial, and the ‘disturbances’ from which such divergences result need not by any means be temporary in character, so that a longer period would lessen the divergence, but may in fact be progressive in character though time.”

References

  • Angell, James W., 1922, “International Trade Under Inconvertible Paper,” The Quarterly Journal of Economics, Vol. 36, No. 3, pp. 359–412.

    Article  Google Scholar 

  • Cashin, Paul, Luis F. Cespedes, and Ratna Sahay, 2004, “Commodity Currencies and the Real Exchange Rate,” Journal of Development Economics, Vol. 75, pp. 239–68.

    Article  Google Scholar 

  • Cashin, Paul, and C. John McDermott, 2006, “Parity Reversion in Real Exchange Rates: Fast, Slow or Not at All,” IMF Staff Papers, Vol. 53, No. 1, pp. 64–89.

    Google Scholar 

  • Chen, Yu-chin, and Kenneth S. Rogoff, 2002, Commodity Currencies and Empirical Exchange Rate Puzzles, IMF Working Paper 02/27 (Washington: International Monetary Fund).

    Google Scholar 

  • Rogoff, Kenneth S., 1996, “The Purchasing Power Parity Puzzle,” Journal of Economic Literature, Vol. 34, pp. 647–68.

    Google Scholar 

  • Terborgh, G.W., 1926, “The Purchasing-Power Parity Theory,” Journal of Political Economy, Vol. 34, No. 2, pp. 197–208.

    Article  Google Scholar 

  • Viner, Jacob, 1937, Studies in the Theory of International Trade (New York/London: Harper and Brothers).

    Google Scholar 

Download references

Authors
  1. Jacques J. Polak
    View author publications

    You can also search for this author in PubMed Google Scholar

Additional information

The author was the Director of the IMF Research Department from 1958–79. He thanks Paul Cashin for criticism of an earlier version of this note.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Polak, J.J. Parity Reversion in Real Exchange Rates: A Puzzle or a Nonissue?. IMF Econ Rev 53, 476–478 (2006). https://doi.org/10.2307/30035922

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.2307/30035922

Search

Navigation