The Short- and Long-Run Relationships Between the Exchange Rate of the Dollar and U.S. Inflation

Document Type

Article

Language

eng

Format of Original

13 p.

Publication Date

Summer 1997

Publisher

Taylor & Francis (Routledge)

Source Publication

International Economic Journal

Source ISSN

1016-8737

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 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 the purchasing power parity hypothesis. It is also found that in the short run, the rate of price inflation. Finally, there appears to be bi-directional causality between producer prices and exchange rates.

Comments

International Economic Journal, Vol. 11, No. 2 (Summer 1997): DOI: 10.1080/10168739700000011#.UkRclT-c7_E.

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