Re-examining the Evidence for Long-Run Purchasing Power Parity
AbstractD. Corbae and S. Ouliaris (1991) examined Australia's long-run real exchange rate and concluded that, because the data follow a random walk, purchasing power parity does not hold as a long-run equilibrium relation. The authors reexamine their data by calculating nonparametric measures of persistence and estimating fractionally integrated ARMA models. They find that shocks to the real exchange rate have a finite life. This result is consistent with long-run purchasing power parity. Copyright 1998 by The Economic Society of Australia.
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Bibliographic InfoArticle provided by The Economic Society of Australia in its journal The Economic Record.
Volume (Year): 74 (1998)
Issue (Month): 224 (March)
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- Ata Assaf, 2004. "Rescaled variance analysis of real exchange rates," Applied Economics Letters, Taylor and Francis Journals, vol. 11(5), pages 303-306.
- Henry, Olan T. & Olekalns, Nilss, 2002. "Does the Australian dollar real exchange rate display mean reversion," Journal of International Money and Finance, Elsevier, vol. 21(5), pages 651-666, October.
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- Mubariz Hasanov, 2012. "Re-examining Purchasing Power Parity for the Australian Real Exchange Rate," Hacettepe University Department of Economics Working Papers 20124, Hacettepe University, Department of Economics.
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- Brissimis, Sophocles N. & Sideris, Dimitris A. & Voumvaki, Fragiska K., 2005. "Testing long-run purchasing power parity under exchange rate targeting," Journal of International Money and Finance, Elsevier, vol. 24(6), pages 959-981, October.
- Chiang, Shu-Mei & Lee, Yen-Hsien & Su, Hsin-Mei & Tzou, Yi-Pin, 2010. "Efficiency tests of foreign exchange markets for four Asian Countries," Research in International Business and Finance, Elsevier, vol. 24(3), pages 284-294, September.
- Ata Assaf, 2006. "Nonlinear Trend Stationarity in Real Exchange Rates: Evidence from Nonlinear ADF tests," Annals of Economics and Finance, Society for AEF, vol. 7(2), pages 283-294, November.
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