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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- 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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