Purchasing power parity in Brazil: a test for fractional cointegration
AbstractThe purpose of this paper is to test the validity of the purchasing power parity (PPP) doctrine in Brazil. Historical data for the period 1855-1996 are considered. The period 1855-1990 is also analysed in order to compare the results with those obtained by Zini and Cati (1993) using the conventional cointegration analysis. This article uses fractional cointegration analysis, a flexible methodology which allows for more subtle forms of mean reversion. The tests performed are those of Geweke and Porter-Hudak (1983), and of Hurvich and Ray (1995). The critical values for both tests are generated by simulation because they are non-standard. The empirical results do not support the absolute PPP hypothesis but the relative PPP holds in the long run.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Applied Economics.
Volume (Year): 33 (2001)
Issue (Month): 9 ()
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- Mark J. Holmes, 2002. "Purchasing Power Parity and the Fractional Integration of the Real Exchange Rate: New Evidence for Less Developed Countries," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 27(1), pages 125-135, June.
- Andre Varella Mollick & Margot Quijano, 2004. "The Mexican Peso And The Korean Won Real Exchange Rates: Evidence From Productivity Models," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 29(1), pages 189-208, June.
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- Guglielmo Maria Caporale & Luis A. Gil-Alana, 2010. "Real Exchange Rates In Latin America: The Ppp Hypothesis And Fractional Integration," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 35(2), pages 1-21, June.
- Simões, Oscar R. & Marçal, Emerson Fernandes, 2012.
"Agregação temporal e não-linearidade afetam os testes da Paridade do Poder de compra: Evidência a partir de dados brasileiros,"
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310, Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil).
- Oscar R. Simões & Emerson Fernandes Marçal, 2012. "Agregação temporal e não-linearidade afetam os testes da paridade do poder de compra: Evidência a partir de dados brasileiros," Revista Brasileira de Economia, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil), vol. 66(3), pages 375-399, October.
- HOLMES, Mark J, 2008. "Non-Linear Trend Stationarity And Co-Trending In Latin American Real Exchange Rates," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 8(1), pages 107-118.
- Marcos José Dal Bianco, 2008. "Argentinean real exchange rate 1900-2006, test purchasing power parity theory," Estudios de Economia, University of Chile, Department of Economics, vol. 35(1 Year 20), pages 33-64, June.
- Mark Holmes, 2008. "Real Exchange Rate Stationarity in Latin America and Relative Purchasing Power Parity: A Regime Switching Approach," Open Economies Review, Springer, vol. 19(2), pages 261-275, April.
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