Long Run Real Exchange Rates - A Cointegration Analysis
AbstractLong run purchasing power is tested on 16 OECD countries using data from 1960 to 1994, PPP is rejected for some countries (Canada, Japan, Switzerland, Austria, Italy and Spain) and not rejected for other (Sweden, France, Holland and the United Kingdom). For the latter countries, impulse response functions show that half of a disturbance tot the equilibrium real exchange rate disapperars within three years. The method used is Johansen's maximum likelihood approach to cointegration. Simulations are used to obtain empirical critical values of the tests.
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Bibliographic InfoPaper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 119.
Length: 37 pages
Date of creation: Jun 1996
Date of revision:
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Purchasing power parity; real exchange rates;
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- F31 - International Economics - - International Finance - - - Foreign Exchange
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