PPP Strikes Back: Aggregation and the Real Exchange Rate

We show the importance of a dynamic aggregation bias in accounting for the PPP puzzle. We prove that established time series and panel methods substantially exaggerate the persistence of real exchange rates because of heterogeneity in the dynamics of disaggregated relative prices. When heterogeneity is properly taken into account, estimates of the real exchange rate half-life fall dramatically, to little more than one year, or significantly below Rogoff's consensus view' of three to five years. We show corrected estimates are consistent with plausible nominal rigidities, thus, arguably, solving the puzzle. We also explain why traded goods prices account for the bulk of the persistence and volatility of the real exchange rate. The reason is that traded goods prices display dynamics that are more heterogeneous than non-traded ones.

Considering the role of cognitive control in expert performance

© 2014, Springer Science+Business Media Dordrecht. Dreyfus and Dreyfus’ (1986) influential phenomenological analysis of skill acquisition proposes that expert performance is guided by non-cognitive responses which are fast, effortless and apparently intuitive in nature. Although this model has been criticised (e.g., by Breivik Journal of Philosophy of Sport, 34, 116–134 2007, Journal of the Philosophy of Sport, 40, 85–106 2013; Eriksen 2010; Montero Inquiry:An interdisciplinary Journal of Philosophy, 53, 105–122 2010; Montero and Evans 2011) for over-emphasising the role that intuition plays in facilitating skilled performance, it does recognise that on occasions (e.g., when performance goes awry for some reason) a form of ‘detached deliberative rationality’ may be used by experts to improve their performance. However, Dreyfus and Dreyfus (1986) see no role for calculative problem solving or deliberation (i.e., drawing on rules or mental representations) when performance is going well. In the current paper, we draw on empirical evidence, insights from athletes, and phenomenological description to argue that ‘continuous improvement’ (i.e., the phenomenon whereby certain skilled performers appear to be capable of increasing their proficiency even though they are already experts; Toner and Moran 2014) among experts is mediated by cognitive (or executive) control in three distinct sporting situations (i.e., in training, during pre-performance routines, and while engaged in on-line skill execution). We conclude by arguing that Sutton et al. Journal of the British Society for Phenomenology, 42, 78–103 (2011) ‘applying intelligence to the reflexes’ (AIR) approach may help to elucidate the process by which expert performers achieve continuous improvement through analytical/mindful behaviour during training and competition