The Roles of Nominal Exchange Rate and Relative Price Adjustments in PPP Reversion
用双变量阈值向量误差修正模型研究名义汇率和相对价格如何恢复购买力平价，发现汇率只在阈值外调整，而阈值内主要靠相对价格调整。
This paper investigates the roles of the nominal exchange rate and relative prices in restoring purchasing power parity (PPP) by estimating their dynamics with a bivariate threshold vector error correction model. Our empirical results suggest a threshold cointegrating relationship between the nominal exchange rate and relative prices. However, these two variables play different roles in restoring PPP. The nominal exchange rate adjusts to restore PPP only outside the threshold band. Within the band, PPP is restored mainly through adjustments in relative prices.