How Sure Are We About PPP? Panel Evidence with the Null of Stationary Real Exchange Rates
AbstractThere has been serious suspicion of a spurious rejection of the unit roots in panel studies of PPP due to the failure to control for cross-sectional dependence. This article presents evidence of mean-reversion in industrial country real exchange rates in a set up that accounts naturally for cross-sectional dependence, is invariant to the benchmark currency and capable of detecting against regime changes, and actually tests for the null of interest, ie. the purchasing power parity. Our results are based on a KPSS test for the stationarity null generalized in a multivariate random walk plus noise model by Nyblom and Harvey (1998).
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2120.
Date of creation: Mar 1999
Date of revision:
Contact details of provider:
Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
Find related papers by JEL classification:
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Kuo, Biing-Shen & Mikkola, Anne, 2000. "Forecasting the Real US/DEM Exchange Rate: TAR vs. AR," Research Discussion Papers 13/2000, Bank of Finland.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.