Retail prices and the real exchange rate
Name
987003444-MIT.pdf
Description
Full printable version
Size
8.24 MB
Format
Adobe PDF
Checksum (MD5)
a4aced8585d825c1e41ab8922cf2ab0d
Author(s)
Pal, Arup, M.Fin. Massachusetts Institute of Technology
Advisor(s)
Roberto Rigobon.
Date Issued
2017
Publisher
Massachusetts Institute of Technology
Abstract
This paper uses daily frequency relative prices gathered from online retailers for a basket of countries to investigate the Purchasing Power Parity relationship, exchange rate pass-throughs and the effect of price shocks on nominal exchange rates. We fit a structural VAR model on exchange rate and relative price data to compute impulse responses for each country. We find evidence of exchange rate pass-through for most countries, even at short horizons. Contrary to PPP predictions, we find that most countries witness an exchange rate appreciation post a domestic inflation shock. We study the persistence of each variety of shock and the overall effect on the real exchange rate. We find that real exchange rates are more likely to mean revert if the shock arises from nominal exchange rates as opposed to relative prices.
Description
Thesis: M. Fin., Massachusetts Institute of Technology, Sloan School of Management, Master of Finance Program, 2017.
Cataloged from PDF version of thesis.
Includes bibliographical references (pages 43).
Subjects
Sloan School of Management. Master of Finance Program.
MIT Department
Sloan School of Management. Master of Finance Program.
Sloan School of Management
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