IDEAS home Printed from https://ideas.repec.org/a/bla/jfinan/v50y1995i4p1309-19.html
   My bibliography  Save this article

The Exchange Rate in the Presence of Transaction Costs: Implications for Tests of Purchasing Power Parity

Author

Listed:
  • Sercu, Piet
  • Uppal, Raman
  • Van Hulle, Cynthia

Abstract

With transaction costs for trading goods, the nominal exchange rate moves within a band around the nominal purchasing power parity (PPP) value. The authors model the behavior of the band and of the exchange rate within the band. The model explains why there are below-unity slope coefficients in regression tests of PPP and why these increase toward unity under hyperinflation or with low-frequency data. The authors' results are independent of the presence of nontraded goods in the economy. Copyright 1995 by American Finance Association.

Suggested Citation

  • Sercu, Piet & Uppal, Raman & Van Hulle, Cynthia, 1995. "The Exchange Rate in the Presence of Transaction Costs: Implications for Tests of Purchasing Power Parity," Journal of Finance, American Finance Association, vol. 50(4), pages 1309-1319, September.
    • Handle: RePEc:bla:jfinan:v:50:y:1995:i:4:p:1309-19
    as

    Download full text from publisher

    File URL: https://links.jstor.org/sici?sici=0022-1082%28199509%2950%3A4%3C1309%3ATERITP%3E2.0.CO%3B2-X&origin=repec
    File Function: full text
    Download Restriction: Access to full text is restricted to JSTOR subscribers. See https://www.jstor.org for details.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jfinan:v:50:y:1995:i:4:p:1309-19. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/afaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.