Purchasing Power Parity, Productivity Differentials And Non-Linearity
AbstractThe purpose of this paper is to apply a symmetric band threshold autoregressive model to investigate the non-linear adjustment of the real pound-dollar rate over a period from 1885 to 2003. After controlling for the Harrod-Balassa-Samuelson effects, we find evidence to support a non-linear mean reversion of the real pound-dollar rate. Moreover, the estimated half-life is about two years with large shocks. We therefore provide a solution to the purchasing power parity puzzle. Copyright � 2009 The Authors. Journal compilation � 2009 Blackwell Publishing Ltd and The University of Manchester.
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Bibliographic InfoArticle provided by University of Manchester in its journal The Manchester School.
Volume (Year): 77 (2009)
Issue (Month): 3 (06)
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- Woo, Kai-Yin & Lee, Shu-Kam & Chan, Alan, 2014. "Non-linear adjustments to intranational PPP," Journal of Macroeconomics, Elsevier, vol. 40(C), pages 360-371.
- Wu, Jyh-Lin & Cheng, Su-Yin & Hou, Han, 2011. "Further evidence on purchasing power parity and country characteristics," International Review of Economics & Finance, Elsevier, vol. 20(2), pages 257-266, April.
- Paul R. Bergin & Reuven Glick & Jyh-Lin Wu, 2013.
"The Micro-Macro Disconnect of Purchasing Power Parity,"
The Review of Economics and Statistics,
MIT Press, vol. 95(3), pages 798-812, July.
- Paul R. Bergin & Reuven Glick & Jyh-Lin Wu, 2009. "The Micro-Macro Disconnect of Purchasing Power Parity," NBER Working Papers 15624, National Bureau of Economic Research, Inc.
- Paul R. Bergin & Reuven Glick & Jyh-Lin Wu, 2010. "The micro-macro disconnect of purchasing power parity," Working Paper Series 2010-14, Federal Reserve Bank of San Francisco.
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