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Unit roots and purchasing power parity: another kick at the can

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  • P. S. Sephton

Abstract

Lopez et al. (2005) demonstrated that single-equation unit-root tests cannot provide conclusive evidence of whether real exchange rates are stationary because inference depends critically on the lag-lengths used to construct the test statistics, a result reinforced by a recent work by Sweeney (2006). The purpose of this article is to revisit the issue, first demonstrating the necessary conditions under which this approach of testing for Purchasing Power Parity (PPP) is appropriate.

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Bibliographic Info

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

Volume (Year): 42 (2010)
Issue (Month): 27 ()
Pages: 3439-3453

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Handle: RePEc:taf:applec:v:42:y:2010:i:27:p:3439-3453

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References

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Cited by:
  1. Peter Sephton, 2008. "Critical values of the augmented fractional Dickey–Fuller test," Empirical Economics, Springer, vol. 35(3), pages 437-450, November.

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