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Cointegration and the PPP and the UIP hypotheses: An application to the Spanish integration in the EC

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Author Info

  • Mariam Camarero
  • Cecilio Tamarit

Abstract

The aim of this paper is to find some empirical evidence on Purchasing Power Parity (PPP) and Uncovered Interest Parity (UIP) in the Spanish case vis à vis the European Community for the period 1980–89. The main contribution of the paper is the aggregation of the variables corresponding to the countries that participate in the exchange rate mechanism of the European Monetary System. The results support the importance of the interest differential as an explanatory variable for the short-term adjustment to the PPP. The results follow from powerful estimation techniques, applied in the framework of a multivariate error-correction model using the maximum-likelihood procedure as developed by Johansen and Juselius (1992). Copyright Kluwer Academic Publishers 1996

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File URL: http://hdl.handle.net/10.1007/BF01886129
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Bibliographic Info

Article provided by Springer in its journal Open Economies Review.

Volume (Year): 7 (1996)
Issue (Month): 1 (January)
Pages: 61-76

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Handle: RePEc:kap:openec:v:7:y:1996:i:1:p:61-76

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Web page: http://www.springerlink.com/link.asp?id=100323

Related research

Keywords: purchasing power parity; uncovered interest parity; exchange rate; European integration; cointegration; weighted variables; F31; F36; C3;

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References

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Citations

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Cited by:
  1. Rashid, Abdul & Husain, Fazal, 2012. "On the modeling of exchange rate: some evidence from Pakistan," MPRA Paper 47547, University Library of Munich, Germany.
  2. Giorgio Canarella & Stephen M. Miller & Stephen K. Pollard, 2012. "Purchasing Power Parity between the UK and the Euro Area," Working papers 2012-46, University of Connecticut, Department of Economics.
  3. David Guerreiro, 2013. "Is the European debt crisis a mere balance of payments crisis?," FIW Working Paper series 118, FIW.
  4. Amalia Zumaquero & Rodrigo Urrea, 2002. "Purchasing Power Parity: Error Correction Models and Structural Breaks," Open Economies Review, Springer, vol. 13(1), pages 5-26, January.

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