Measuring Half-Lives Using A Non-Parametric Bootstrap Approach
AbstractIn this paper we extend the Murray and Papell (2002) study by using a non-parametric bootstrap approach which allows for non-normality, and focusing on quarterly real exchange rate in twenty OECD countries in the post-1973 floating period. We run Augmented Dickey-Fuller (ADF) regressions, and estimate the half-lives (and confidence intervals) from the corresponding impulse response functions. Further, we use an approximately median-unbiased estimator of the autoregressive parameters, and report the implied point estimates and confidence intervals. We find that accounting for nonnormality results in even higher estimates of the degree of persistence of PPP deviations,but, as in Murray and Papell (2002), the confidence intervals are so wide that no strong conclusions are warranted on the existence of a PPP puzzle.
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Bibliographic InfoPaper provided by Economics and Finance Section, School of Social Sciences, Brunel University in its series Public Policy Discussion Papers with number 04-13.
Length: 9 pages
Date of creation: Sep 2004
Date of revision:
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Postal: Brunel University, Uxbridge, Middlesex UB8 3PH, UK
Other versions of this item:
- Guglielmo Maria Caporale & Mario Cerrato & Nicola Spagnolo, 2005. "Measuring half-lives: using a non-parametric bootstrap approach," Applied Financial Economics Letters, Taylor and Francis Journals, Taylor and Francis Journals, vol. 1(1), pages 1-4, January.
- Guglielmo Maria Caporale & Mario Cerrato & Nicola Spagnolo, 2004. "Measuring Half-Lives Using A Non-Parametric Bootstrap Approach," Economics and Finance Discussion Papers 04-13, Economics and Finance Section, School of Social Sciences, Brunel University.
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- Lutz Kilian & Tao Zha, 2002. "Quantifying the uncertainty about the half-life of deviations from PPP," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 17(2), pages 107-125.
- Mario Cerrato & Neil Kellard & Nicholas Sarantis, 2005. "The Purchasing Power Parity Persistence Paradigm: Evidence from Black Currency Markets," Money Macro and Finance (MMF) Research Group Conference 2005, Money Macro and Finance Research Group 34, Money Macro and Finance Research Group.
- Kim, Jae H. & Ji, Philip Inyeob, 2011. "Mean-reversion in international real interest rates," Economic Modelling, Elsevier, vol. 28(4), pages 1959-1966, July.
- Kim, Jae H. & Silvapulle, Param & Hyndman, Rob J., 2007.
"Half-life estimation based on the bias-corrected bootstrap: A highest density region approach,"
Computational Statistics & Data Analysis, Elsevier,
Elsevier, vol. 51(7), pages 3418-3432, April.
- Jae Kim & Param Silvapulle & Rob J. Hyndman, 2006. "Half-Life Estimation based on the Bias-Corrected Bootstrap: A Highest Density Region Approach," Monash Econometrics and Business Statistics Working Papers, Monash University, Department of Econometrics and Business Statistics 11/06, Monash University, Department of Econometrics and Business Statistics.
- Qian Chen & David E. Giles, 2007. "A Saddlepoint Approximation to the Distribution of the Half-Life Estimator in an Autoregressive Model: New Insights Into the PPP Puzzle," Econometrics Working Papers 0703, Department of Economics, University of Victoria.
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