@techreport{NBERw18331, title = "Mussa Redux and Conditional
PPP", author = "Paul R. Bergin and Reuven Glick and Jyh-Lin Wu",
institution = "National Bureau of Economic Research", type =
"Working Paper", series = "Working Paper Series", number =
"18331", year = "2012", month = "August", URL =
"http://www.nber.org/papers/w18331", abstract = {Long half-lives
of real exchange rates are often used as evidence against
monetary sticky price models. In this study we show how exchange
rate regimes alter the long-run dynamics and half-life of the
real exchange rate, and we recast the classic defense of such
models by Mussa (1986) from an argument based on short-run
volatility to one based on long-run dynamics. The first key
result is that the extremely persistent real exchange rate found
commonly in post Bretton Woods data does not apply to the
preceding fixed exchange rate period in our sample, where the
half-live was perhaps half as large. This result suggests a
reinterpretation of Mussa’s original finding, indicati