Exchange Rates, Foreign Trade Prices and PPs in OECD Countries: An Analysis of the period 1960-2003

Abstract

We analyse the evolution of Exchange Rates of Euro and previous national currencies of Euro Zone, as well as those corresponding to other currencies of OECD countries, with particular emphasis on the reaction of exchange rates to inflation differences, and the consequences of those changes on foreign trade and economic growth. We also compare the evolution of Exchange Rates and Purchasing Power Parities in those countries for the period 1960-2003. We present main comparative data and some econometric models which show the strong inverse relationships between the movements of relative domestic prices and exchange rates of domestic currencies to dollar, and test for homogeneity of this relationship among OECD countries.