The evience suggests that PPP hold both in the short and long run Essay - 1

The evience suggests that PPP hold both in the short and long run - Essay Example an be substantial short-run deviations from PPP, but in the long run relative PPP holds remarkably well because fundamentals and arbitrage are dominant long-run economic forces† (Marewijk, chapter 20); In short run price level tends to be sticky and takes time to change (Rogoff, 1996). And that â€Å"Dorodian, Jung, and Boyd [1999] found that in the long-run, PPP tends to hold more often under a floating exchange rate regime than under a fixed exchange rate system† (Anorou, Braha & Ahmad, 2002). There is however some studies which focused on the short run basis of PPP. Chowdhry, Roll & Xia (2004) find that â€Å"relative PPP holds well in the short run in both single-country-pair OLS regressions and a pooled system regression† and that their evidence â€Å"for short-run relative PPP is unlikely to be driven by missing world factors or by real effects of inflation†. Further, â€Å"our results complement the findings from the long-run PPP tests, and help resolve the PPP puzzle in the short run†. They also have an evidence that â€Å"relative purchasing power parity holds quite well in the short run when inflation is extracted from stock prices†. â€Å"For small differences in annual inflation between the United States and the country concerned, the correlation between relative inflation and depreciation in each of the years seems low. Relative PPP appears to â€Å"hold more closely for countries experiencing relatively high inflation† (Tayl or & Taylor, 2004); â€Å"Finally, the IIRE is operative in both the short and long run in response to changes in the domestic price level† (Elwood & Fields, 1998). Based on those results, Click (1996), as mentioned by Fujiki & Kitamura in 2004 concludes that in â€Å"the time-series dimension, using the random-effects model, purchasing power parity holds, conditional upon the Balassa–Samuelson effect.† Chapter 18 — Exchange Rate Theories discusses the favorable effect of PPP in the short run over long run. â€Å"PPP holds even in the

Philosophy Assignment Example | Topics and Well Written Essays - 750 words - 8

Philosophy - Assignment Example Therefore this distinct and clear perception of Descartes depends on assumption that the Almighty God exists, which also depends on the criteria of distinct and clear perception. It is therefore a common knowledge that what we clearly and distinctly perceive as true always exists like Descartes clearly and distinctly perceives that God exists and that He (God) cannot lie. Loeb contrasts Descartes current belief of clearly and distinct perception that something exists. Loeb compares a time when one is not able to currently perceive something a clear and distinct perception, but he/she can previously recollect a clear and distinct perception of something that existed in the past. He calls this a recollected distinct and clear perception unlike the current distinct and clear perception that has no basis at all. He therefore puts it that beliefs that are based on distinct and clear perception, as either recollected or current distinct and clear perceptions. He (Loeb) therefore, says that a current distinct and clear perception will include a current assumption and current theorems. But recollected distinct and clear perception will include recollected assumptions and theorems. This is unlike Descartes who had invoked the distinction between recollected and current theorems in his passages to the circle. It is therefore clear that any psychological doctri ne that can use recollected distinct and clear perceptions will be dislodged by the doubtful supposition, and that it will seem more acceptable because doubt is a state that can destabilize belief. (Loeb, pg 96) Again Loeb finds a problem in the Cartesian cycle that claims that the rule of knowledge of truth is a complete condition for stability of beliefs that are based on distinct and clear perceptions. This is by the supposition that claims the skeptical hypothesis as true.