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An alternative test of purchasing power parity

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  • Wallace, Frederick H.
  • Shelley, Gary L.

Abstract

The long-horizon approach of Fisher and Seater (1993) is applied to the data developed by Taylor (2002) to test for purchasing power parity (PPP). Even after accounting for the low power of the test, the evidence is generally supportive of PPP.

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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 92 (2006)
Issue (Month): 2 (August)
Pages: 177-183

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Handle: RePEc:eee:ecolet:v:92:y:2006:i:2:p:177-183

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References

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  1. Donald W.K. Andrews, 1986. "Power in Econometric Applications," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 800, Cowles Foundation for Research in Economics, Yale University.
  2. Kenneth Rogoff, 1996. "The Purchasing Power Parity Puzzle," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 647-668, June.
  3. Graham Elliott & Thomas J. Rothenberg & James H. Stock, 1992. "Efficient Tests for an Autoregressive Unit Root," NBER Technical Working Papers 0130, National Bureau of Economic Research, Inc.
  4. Alan M. Taylor & Mark P. Taylor, 2004. "The Purchasing Power Parity Debate," Journal of Economic Perspectives, American Economic Association, vol. 18(4), pages 135-158, Fall.
  5. Patrick J. Coe & James M. Nason, 2004. "Long-run monetary neutrality and long-horizon regressions," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 19(3), pages 355-373.
  6. Serletis, Apostolos & Gogas, Periklis, 2004. "Long-horizon regression tests of the theory of purchasing power parity," Journal of Banking & Finance, Elsevier, Elsevier, vol. 28(8), pages 1961-1985, August.
  7. Alan M. Taylor, 2002. "A Century Of Purchasing-Power Parity," The Review of Economics and Statistics, MIT Press, vol. 84(1), pages 139-150, February.
  8. Denis Kwiatkowski & Peter C.B. Phillips & Peter Schmidt, 1991. "Testing the Null Hypothesis of Stationarity Against the Alternative of a Unit Root: How Sure Are We That Economic Time Series Have a Unit Root?," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 979, Cowles Foundation for Research in Economics, Yale University.
  9. Mark P. Taylor, 1995. "The Economics of Exchange Rates," Journal of Economic Literature, American Economic Association, vol. 33(1), pages 13-47, March.
  10. Fisher, Mark E & Seater, John J, 1993. "Long-Run Neutrality and Superneutrality in an ARIMA Framework," American Economic Review, American Economic Association, American Economic Association, vol. 83(3), pages 402-15, June.
  11. Coe, Patrick J. & Nason, James M., 2003. "The long-horizon regression approach to monetary neutrality: how should the evidence be interpreted?," Economics Letters, Elsevier, Elsevier, vol. 78(3), pages 351-356, March.
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Citations

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Cited by:
  1. Manuel Gómez-Zaldívar & Daniel Ventosa-Santaulària & Frederick Wallace, 2013. "The PPP hypothesis and structural breaks: the case of Mexico," Empirical Economics, Springer, Springer, vol. 45(3), pages 1351-1359, December.
  2. Simpson, Marc W. & Grossmann, Axel, 2014. "An examination of the forward prediction error of U.S. dollar exchange rates and how they are related to bid-ask spreads, purchasing power parity disequilibria, and forward premium asymmetry," The North American Journal of Economics and Finance, Elsevier, vol. 28(C), pages 221-238.
  3. Dimitriou, Dimitrios & Simos, Theodore, 2013. "Testing purchasing power parity for Japan and the US: A structural-break approach," Japan and the World Economy, Elsevier, Elsevier, vol. 28(C), pages 53-59.
  4. Joe Cox, 2008. "Purchasing power parity and cultural convergence: evidence from the global video games market," Journal of Cultural Economics, Springer, Springer, vol. 32(3), pages 201-214, September.
  5. Tarkan Cavusoglu & Erdinc Telatar, 2011. "Purchasing Power Parity Revisited: A Time-Varying Parameter Approach," Economics Bulletin, AccessEcon, vol. 31(3), pages 2701-2708.
  6. Miguel de Carvalho & Paulo Julio, 2010. "Digging Out the PPP Hypothesis: an Integrated Empirical Coverage," GEE Papers, Gabinete de Estratégia e Estudos, Ministério da Economia e da Inovação 0024, Gabinete de Estratégia e Estudos, Ministério da Economia e da Inovação, revised Sep 2010.
  7. repec:ebl:ecbull:v:6:y:2008:i:33:p:1-8 is not listed on IDEAS
  8. Mario Gómez Aguirre & José Carlos A. Rodríguez Chávez, 2012. "Análisis de la paridad del poder de compra: evidencia empírica entre México y Estados Unidos," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 27(1), pages 169-207.
  9. Mohsen Bahmani-Oskooee & Su Zhou & Ali Kutan, 2007. "A Century of Purchasing Power Parity: Further Evidence," Economics Bulletin, AccessEcon, vol. 6(31), pages 1-9.
  10. Frederick Wallace, 2008. "Nonlinear unit root tests of PPP using long-horizon data," Economics Bulletin, AccessEcon, vol. 6(33), pages 1-8.
  11. Frederick Wallace, 2011. "Purchasing power parity in Mexico: a historical note," Applied Economics Letters, Taylor & Francis Journals, Taylor & Francis Journals, vol. 18(4), pages 349-352.
  12. Wallace, Frederick, 2009. "Cointegration tests of purchasing power parity," MPRA Paper 18079, University Library of Munich, Germany.
  13. Shelley, Gary & Wallace, Frederick, 2007. "Co-movements in international dollar price levels," MPRA Paper 4133, University Library of Munich, Germany.
  14. repec:ebl:ecbull:v:6:y:2007:i:31:p:1-9 is not listed on IDEAS
  15. Wallace, Frederick & Lozano Cortés, René & Cabrera-Castellanos, Luis F., 2008. "Pruebas de cointegración de paridad de poder adquisitivo
    [Cointegration Tests of Purchasing Power Parity]
    ," MPRA Paper 10011, University Library of Munich, Germany.

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