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Testing the purchasing power parity in China

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Author Info
Olivier Darné
Jean-François Hoarau

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Abstract

In this paper we examine whether purchasing power parity holds in the long run in China for the period 1970:1 to 2006:5 from an alternative method relative to the previous studies. We underlined the effects of large, but infrequent shocks due to changes of Chinese exchange policy (undertaken since the China's foreign exchange reform) on the real exchange rate, using outlier methodology. We also show that there is no endency to the purchasing power parity in China to hold in the long run during this period.

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Paper provided by University of Paris West - Nanterre la Défense, EconomiX in its series EconomiX Working Papers with number 2006-18.

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Length: 20 pages
Date of creation: 2006
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Handle: RePEc:drm:wpaper:2006-18

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Related research
Keywords: Purchasing power parity real exchange rate unit root tests outliers renminbi.

Find related papers by JEL classification:
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models
F31 - International Economics - - International Finance - - - Foreign Exchange

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