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The Canadian Dollar and Purchasing Power Parity during the Recent Float

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  • Kouretas, Georgios P

Abstract

This paper re-examines the purchasing power parity (PPP) concept for five bilateral Canadian dollar exchange rates. The Johansen cointegration technique is employed. Evidence is found in favor of PPP when wholesale prices are used but not when consumer prices are utilized; whereas, in all but one case, it is not possible to reject the symmetry and proportionality hypotheses. Furthermore, it is shown that the dimension of the cointegration space may exhibit sample dependency, but the estimated coefficients are stable in recursive estimations. Finally, by implementing the multivariate KPSS test for the null hypothesis of cointegration, Johansen's results are overturned. Copyright 1997 by Blackwell Publishing Ltd.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Review of International Economics.

Volume (Year): 5 (1997)
Issue (Month): 4 (November)
Pages: 467-77

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Handle: RePEc:bla:reviec:v:5:y:1997:i:4:p:467-77

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0965-7576

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Cited by:
  1. Guneratne Banda Wickremasinghe, 2004. "Purchasing Power Parity Hypothesis in Developing Economies:Some Empirical Evidence from Sri Lanka," International Finance, EconWPA 0406005, EconWPA.
  2. Salehizadeh, Mehdi & Taylor, Robert, 1999. "A test of purchasing power parity for emerging economies," Journal of International Financial Markets, Institutions and Money, Elsevier, Elsevier, vol. 9(2), pages 183-193, April.
  3. Hélène Chevrou-Séverac, 2002. "Convergence monétaire européenne, PPA et PINC," Économie et Prévision, Programme National Persée, Programme National Persée, vol. 155(4), pages 79-94.
  4. Taylor Mark P. & Sarno Lucio, 2001. "Real Exchange Rate Dynamics in Transition Economies: A Nonlinear Analysis," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, De Gruyter, vol. 5(3), pages 1-26, October.
  5. Guneratne Banda Wickremasinghe, 2004. "The Sri Lankan Rupee and Purchasing Power Parity during the Current Floating Period," International Trade, EconWPA 0406005, EconWPA.
  6. Ericsson, Johan & Irandoust, Manuchehr, 2004. "The productivity-bias hypothesis and the PPP theorem: new evidence from panel vector autoregressive models," Japan and the World Economy, Elsevier, Elsevier, vol. 16(2), pages 121-138, April.

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