Question: Is overshooting (in theory and in practice) consistent with purchasing power parity? Consider the reasons for the usefulness of PPP in the short run versus

Is overshooting (in theory and in practice) consistent with purchasing power parity? Consider the reasons for the usefulness of PPP in the short run versus the long run and the assumption we’ve used in the asset approach (in the short run versus the long run). How does overshooting help to resolve the empirical behavior of exchange rates in the short run versus the long run?

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