The Prolongation of Purchasing Power Parity Theory

摘要

This essay introduces the traditional purchasing power parity theory briefly, based on the optimal equilibrium theory brings forward the prolongation of purchasing power parity theory. The original hypothesis of "law of one price" is substituded for "price identity". Transcation costs are considered sufficiently and other factors that influence the change of exchange rates are analysed The positive studies of traditional purchasing power parity theory don't come into existence fully. This essay analyzes the causes of deviations, such as the lacuna of original theory, difficulties to high accuracy in the gross analysis, policy complication as well as the influence to exchange rate of capital flows.