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Re-examining the Evidence for Long-Run Purchasing Power Parity

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  • Olekalns, Nilss
  • Wilkins, Nigel

Abstract

D. 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 Info

Article provided by The Economic Society of Australia in its journal The Economic Record.

Volume (Year): 74 (1998)
Issue (Month): 224 (March)
Pages: 54-61

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Handle: RePEc:bla:ecorec:v:74:y:1998:i:224:p:54-61

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Cited by:
  1. Sophocles N. Brissimis & Dimitris A. Sideris & Fragiska K. Voumvaki, 2004. "Testing Long-Run Purchasing Power Parity under Exchange Rate Targeting," Working Papers 15, Bank of Greece.
  2. Olivier Darne & Jean-Francois Hoarau, 2007. "The purchasing power parity in Australia: evidence from unit root test with structural break," Applied Economics Letters, Taylor & Francis Journals, vol. 15(3), pages 203-206.
  3. 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.
  4. 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.
  5. 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.
  6. Assaf, Ata, 2008. "Nonstationarity in real exchange rates using unit root tests with a level shift at unknown time," International Review of Economics & Finance, Elsevier, vol. 17(2), pages 269-278.
  7. Ata Assaf, 2004. "Rescaled variance analysis of real exchange rates," Applied Economics Letters, Taylor & Francis Journals, vol. 11(5), pages 303-306.
  8. 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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