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Revisiting long-run purchasing power parity with asymmetric adjustment for G-7 countries

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  • Chang, Tsangyao
  • Lee, Chia-Hao
  • Chou, Pei-I
  • Tang, Dai-Piao

Abstract

In this study, we applied a threshold cointegration test advanced by Enders and Siklos (2001) to investigate the properties of asymmetric adjustment on long-run purchasing power parity (PPP) in G-7 countries between January 1994 and April 2010. Although there was strong evidence of long-run PPP for these G-7 countries, with the exception of Canada, the adjustment mechanism was asymmetric. These results have important policy implications for G-7 countries.

Suggested Citation

  • Chang, Tsangyao & Lee, Chia-Hao & Chou, Pei-I & Tang, Dai-Piao, 2011. "Revisiting long-run purchasing power parity with asymmetric adjustment for G-7 countries," Japan and the World Economy, Elsevier, vol. 23(4), pages 259-264.
    • Handle: RePEc:eee:japwor:v:23:y:2011:i:4:p:259-264
    DOI: 10.1016/j.japwor.2011.09.001
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    Cited by:

    1. Chi-Wei Su & Tsangyao Chang & Yu-Shao Liu, 2012. "Revisiting purchasing power parity for African countries: with nonlinear panel unit-root tests," Applied Economics, Taylor & Francis Journals, vol. 44(25), pages 3263-3273, September.
    2. Oladunjoye Opeyemi Nathaniel, 2019. "Validity of Purchasing Power Parity (PPP) Hypothesis in the Ecowas (1980–2017)," Emerging Economy Studies, International Management Institute, vol. 5(2), pages 141-156, November.
    3. Kai-Hua WANG & Chi-Wei SU & Hsu-Ling CHANG & Ji MA & Cristina IOVU, 2017. "Purchasing Power Parity In China: An Empirical Investigation Based On Bootstrap Rollingwindow Test," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 166-181, December.
    4. Jingfei Wu & Mohsen Bahmani-Oskooee & Tsangyao Chang, 2018. "Revisiting purchasing power parity in G6 countries: an application of smooth time-varying cointegration approach," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 45(1), pages 187-196, February.
    5. Lucas dos Santos Lourenço & Claudio Roberto Fóffano Vasconcelos, 2019. "Impacts of exchange rate non-linearity on Brazilian foreign trade," International Economics and Economic Policy, Springer, vol. 16(4), pages 679-699, October.
    6. Mansor H. Ibrahim & Kanokwan Chancharoenchai, 2014. "How inflationary are oil price hikes? A disaggregated look at Thailand using symmetric and asymmetric cointegration models," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 19(3), pages 409-422, July.
    7. Robertson, Raymond & Kumar, Anil & Dutkowsky, Donald H., 2014. "Weak-form and strong-form purchasing power parity between the US and Mexico: A panel cointegration investigation," Journal of Macroeconomics, Elsevier, vol. 42(C), pages 241-262.
    8. Ma, Wei & Li, Haiqi & Park, Sung Y., 2017. "Empirical conditional quantile test for purchasing power parity: Evidence from East Asian countries," International Review of Economics & Finance, Elsevier, vol. 49(C), pages 211-222.

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    More about this item

    Keywords

    Threshold cointegration test; Purchasing power parity; Asymmetric adjustment; G-7 countries; Policy implications;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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