The International Monetary System: A Time of Turbulence

By Jacob S. Dreyer; American Enterprise Institute for Public Policy Research | Go to book overview

Intervention Strategy: Implications of
Purchasing Power Parity and Tests of
Spot Exchange-Market Efficiency

Richard J. Sweeney

Recent work on purchasing power parity (PPP) and on the efficiency of spot exchange markets and its implications for exchange-market intervention are examined in this paper. As will be shown, the evidence from the PPP literature provides virtually no support for intervention, despite some claims to the contrary. Work on spot exchange-market efficiency does provide at least tentative support for intervention, though further work is necessary, particularly on implementation.

The PPP studies considered here principally involve various kinds of regressions of exchange rates (or their changes) on relative national price levels (or their changes). The cross section and cross sectiontime series analyses examined can shed no light on the possibility of beneficial intervention. Most of these studies view exchange-rate changes as lagging behind relative national price-level changes, but they cannot distinguish among alternative versions of PPP. It might be plausible, for example, that a country with an inflation trend 5 percent higher than its partner's will experience a 5 percent trend rate of depreciation. If there is a burst of inflation above the given trend, however, will this be (at least partly) reflected in future exchange-rate movements? If the exchange rate will ultimately reflect these price-level developments, perhaps intervention can hasten the movement of the exchange rates. Thus, the important question for intervention is not the relationship in trends in inflation and depreciation but the deviations from these trends. Unfortunately, most empirical work does not allow for discrimination between the two cases. One paper that ex-

Thanks are due to Gottfried Haberler, Charles Pigott, and Thomas D. Willett. Work on this paper was supported, in part, by a grant from the General Electric Foundation.

-65-

Notes for this page

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this page

Cited page

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited page

Bookmark this page
The International Monetary System: A Time of Turbulence
Table of contents

Table of contents

Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this book

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this book
  • Bookmarks
  • Highlights & Notes
  • Citations
/ 523

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.