The PPP Hypothesis Revisited: Evidence Using a Multivariate Long-Memory Model
AbstractThis paper examines the PPP hypothesis analysing the behaviour of the real exchange rates vis-à-vis the US dollar for four major currencies (namely, the Canadian dollar, the euro, the Japanese yen and the British pound). An innovative approach based on fractional integration in a multivariate context is applied to annual data from 1970 to 2011. Long memory is found to characterise the Canadian dollar, the British pound and the euro, but in all four cases the results are consistent with the relative version of PPP.
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Bibliographic InfoPaper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 1288.
Length: 6 p.
Date of creation: 2013
Date of revision:
PPP; long memory; multivariate fractional integration;
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
- F31 - International Economics - - International Finance - - - Foreign Exchange
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-04-27 (All new papers)
- NEP-MON-2013-04-27 (Monetary Economics)
- NEP-OPM-2013-04-27 (Open Economy Macroeconomics)
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