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Purchasing Power Parity in an Emerging Market Economy: A Long-Span Study for Chile

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  • César Calderón
  • Roberto Duncan

Abstract

Recent research has found evidence that supports the purchasing power parity (PPP) condition in developed countries using very long-span data, while evidence for developing countries is almost nonexistent. This paper tries to fulfill this void by testing the validity of PPP as a long run equilibrium condition for Chile, using data, since its birth as a nation, developed by Díaz, Lüders and Wagner (2003). A battery of unit-root and cointegration tests is applied. We found evidence in favor of PPP. Results are robust to changes in the domestic price index, to changes in the sample period, and to the econometric technique applied.

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Bibliographic Info

Paper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 215.

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Date of creation: Jun 2003
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Handle: RePEc:chb:bcchwp:215

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Citations

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Cited by:
  1. José De Gregorio & Andrea Tokman & Rodrigo Valdés, 2005. "Tipo de cambio flexible y fijación de metas inflacionarias en Chile: experiencia y aspectos resaltantes," Research Department Publications 4428, Inter-American Development Bank, Research Department.
  2. Klaus Schmidt-Hebbel, 2006. "La Gran Transición de Regímenes Cambiarios y Monetarios en América Latina," Economic Policy Papers Central Bank of Chile, Central Bank of Chile 17, Central Bank of Chile.
  3. César Calderón, 2004. "Un Análisis del Comportamiento del Tipo de Cambio Real en Chile," Working Papers Central Bank of Chile, Central Bank of Chile 266, Central Bank of Chile.
  4. José De Gregorio & Andrea Tokman & Rodrigo Valdés, 2005. "Tipo de Cambio Flexible con Metas de Inflación en Chile: Experiencia y Temas de Interés," Economic Policy Papers Central Bank of Chile, Central Bank of Chile 14, Central Bank of Chile.
  5. Hwa-Taek Lee & Gawon Yoon, 2013. "Does purchasing power parity hold sometimes? Regime switching in real exchange rates," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 45(16), pages 2279-2294, June.
  6. 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, University of Chile, Department of Economics, vol. 35(1 Year 20), pages 33-64, June.
  7. 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.
  8. Rodrigo Caputo G. & Marco Núñez N, 2008. "Equilibrium Real Exchange Rate in Chile: Alternative Approaches," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 11(2), pages 59-77, August.
  9. Rodrigo Caputo & Marco Núñez & Rodrigo Valdés, 2007. "Exchange Rate Analysis in Practice," Working Papers Central Bank of Chile, Central Bank of Chile 434, Central Bank of Chile.
  10. Andrea Tokman & Rodrigo Valdés & José De Gregorio, 2005. "Flexible Exchange Rate with Inflation Targeting in Chile: Experience and Issues," IDB Publications 6696, Inter-American Development Bank.
  11. Miranda, Jorge, 2012. "Tipo de Cambio Real en Chile: Dinámica, Tendencia y Equilibrio
    [Real Exchange Rate in Chile: Dynamics, Trend and Equilibrium]
    ," MPRA Paper 43076, University Library of Munich, Germany.
  12. repec:cml:incocp:1-11 is not listed on IDEAS
  13. Jorge Miranda P., 2013. "Deviation of the purchasing power parity hypothesis and equilibrium real exchange rate: Chile 1986-2011," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 16(3), pages 04-31, December.

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