Why might it be true that relative PPP holds better in the long run than the short

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Why might it be true that relative PPP holds better in the long run than the short run? (Think about how international trading firms might react to large and persistent cross border differences in the prices of a tradable good.)

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International Economics Theory and Policy

ISBN: 978-0273754206

9th Edition

Authors: Paul R. Krugman, Maurice Obstfeld, Marc J. Melitz

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Question Posted: Oct 24, 2012 11:45 PM

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Why might it be true that relative PPP holds better in the long run than the short

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If markets are fairly segmented then temporary moves in exchange rates may lead to wide deviation...View the full answer

International Economics Theory and Policy

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