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State of the Art Unit Root Tests and Purchasing Power Parity

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Author Info
Claude Lopez ()
Christian J. Murray
David H. Papell

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Abstract

Recently, Taylor (2002) concludes that long run PPP held over the 20th century for a set of 19 long term real exchange rates. We argue that this conclusion is quite sensitive to the use of sub-optimal lag selection in unit root tests. Using superior lag selection methods,we find that long run PPP held for just over half of the real exchange rates in Taylor’s sample.

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File URL: http://www.artsci.uc.edu/collegedepts/economics/research/docs/Wppdf/2004-04.pdf
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Paper provided by University of Cincinnati, Department of Economics in its series University of Cincinnati, Economics Working Papers Series with number 2004-04.

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Length: 15 pages
Date of creation: Apr 2004
Date of revision:
Handle: RePEc:cin:ucecwp:2004-04

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Elliott, Graham & Rothenberg, Thomas J & Stock, James H, 1996. "Efficient Tests for an Autoregressive Unit Root," Econometrica, Econometric Society, vol. 64(4), pages 813-36, July. [Downloadable!] (restricted)
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  2. Alan M. Taylor, 2002. "A Century Of Purchasing-Power Parity," The Review of Economics and Statistics, MIT Press, vol. 84(1), pages 139-150, February. [Downloadable!] (restricted)
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  3. Serena Ng & Pierre Perron, 2001. "LAG Length Selection and the Construction of Unit Root Tests with Good Size and Power," Econometrica, Econometric Society, vol. 69(6), pages 1519-1554, November. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Angelos Kanas, 2009. "Real exchange rate, stationarity, and economic fundamentals," Journal of Economics and Finance, Springer, vol. 33(4), pages 393-409, October. [Downloadable!] (restricted)
  2. Wallace, Frederick & Lozano Cortés, René & Cabrera-Castellanos, Luis F., 2008. "Pruebas de cointegración de paridad de poder adquisitivo
    [Cointegration Tests of Purchasing Power Parity]    ," MPRA Paper 10011, University Library of Munich, Germany. [Downloadable!]
  3. David O. Cushman, 2008. "Real exchange rates may have nonlinear trends," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 13(2), pages 158-173. [Downloadable!]
  4. Elena Pesavento & Barbara Rossi, 2006. "Impulse Responses Confidence Intervals for Persistent Data: What Have We Learned?," Emory Economics 0603, Department of Economics, Emory University (Atlanta). [Downloadable!]
    Other versions:
  5. jair Ojeda Joya, 2009. "Purchasing Power Parity and Breaking Trend Functions in the Real Exchange Rate," BORRADORES DE ECONOMIA 005521, BANCO DE LA REPÚBLICA. [Downloadable!]
  6. Kim, Hyeongwoo & Moh, Young-Kyu, 2009. "A Century of Purchasing Power Parity Confirmed: The Role of Nonlinearity," MPRA Paper 17488, University Library of Munich, Germany. [Downloadable!]
  7. Jair Ojeda Joya, . "Purchasing Power Parity and Breaking Trend Functions in the Real Exchange Rate," Borradores de Economia 564, Banco de la Republica de Colombia. [Downloadable!]
  8. Frederick Wallace, 2008. "Nonlinear unit root tests of PPP using long-horizon data," Economics Bulletin, Economics Bulletin, vol. 6(33), pages 1-8. [Downloadable!]
  9. Pham Van Ha & Tom Kompas, 2008. "Productivity and Exchange Rate Dynamics: Supporting the Harrod-Balassa-Samuelson Hypothesis through an ‘Errors in Variables’ Analysis," International and Development Economics Working Papers idec08-03, International and Development Economics. [Downloadable!]
  10. Long, Dara, 2008. "Purchasing Power Parity and Real Exchange Rate in Japan," MPRA Paper 11173, University Library of Munich, Germany. [Downloadable!]
  11. Peter Sephton, 2008. "Critical values of the augmented fractional Dickey–Fuller test," Empirical Economics, Springer, vol. 35(3), pages 437-450, November. [Downloadable!] (restricted)
  12. Claude Lopez, 2005. "A Panel Unit Root Test with Good Power in Small Samples," University of Cincinnati, Economics Working Papers Series 2005-01, University of Cincinnati, Department of Economics, revised 2007. [Downloadable!]
    Other versions:
  13. Aslan, Alper, 2008. "Convergence of per capita health care expenditures in OECD Countries," MPRA Paper 10592, University Library of Munich, Germany. [Downloadable!]
  14. Baharumshah, Ahmad Zubaidi & Aggarwal, Raj & Chan, Tze-Haw, 2005. "East Asian Real Exchange Rates and PPP: New Evidence from panel-data tests," MPRA Paper 2023, University Library of Munich, Germany, revised 2007. [Downloadable!]
    Other versions:
  15. Angelos Kanas, 2009. "Real exchange rates and developing countries," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 14(3), pages 280-299. [Downloadable!]
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