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The process followed by PPP data. On the properties of linearity tests

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  • Ivan Paya
  • David Peel

Abstract

Recent research has reported the lack of correct size in stationarity test for PPP deviations within a linear framework. However, theoretically well motivated non-linear models, such as the ESTAR, appear to parsimoniously fit the PPP data and provide an explanation for the PPP 'puzzle'. Employing Monte Carlo experiments the size and power of the non-linear tests are analysed against a variety of nonstationary hypotheses. Aslo the ESTAR model is fitted to data from high inflation economies. The results provide further support for ESTAR specification.

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Bibliographic Info

Article provided by Taylor and Francis Journals in its journal Applied Economics.

Volume (Year): 37 (2005)
Issue (Month): 21 ()
Pages: 2515-2522

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Handle: RePEc:taf:applec:v:37:y:2005:i:21:p:2515-2522

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Citations

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Cited by:
  1. Bevilacqua, Franco, 2006. "Random walks and cointegration relationships in international parity conditions between Germany and USA for the post Bretton-Woods period," UNU-MERIT Working Paper Series 012, United Nations University, Maastricht Economic and social Research and training centre on Innovation and Technology.
  2. Mohsen Bahmani-Oskooee & Ali Kutan & Su Zhou, 2009. "Towards solving the PPP puzzle: evidence from 113 countries," Applied Economics, Taylor and Francis Journals, vol. 41(24), pages 3057-3066.
  3. Bevilacqua, Franco, 2006. "Random walks and cointegration relationships in international parity conditions between Germany and USA for the Bretton-Woods period," UNU-MERIT Working Paper Series 016, United Nations University, Maastricht Economic and social Research and training centre on Innovation and Technology.
  4. Sanusi, Aliyu Rafindadi, 2010. "Exchange rate pass-through to consumer prices in Ghana: Evidence from structural vector auto-regression," MPRA Paper 29491, University Library of Munich, Germany.
  5. Yoon, Gawon, 2010. "Do real exchange rates really follow threshold autoregressive or exponential smooth transition autoregressive models?," Economic Modelling, Elsevier, vol. 27(2), pages 605-612, March.

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