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Testing For Long-Run Purchasing Power Parity In The Post Bretton Woods Era: Evidence From Old And New Tests

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Author Info
Julián Ramajo Hernández(1) () (Universidad de Extremadura (Spain))
Montserrat Ferré Carracedo(2) () (Universidad Rovira i Virgili (Spain).)

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Abstract

. This article uses the most recent tests available to carry out a detailed empirical analysis of the validity of Purchasing Power Parity (PPP) for the exchange rates of 21 industrialized countries in the post-Bretton Woods period. It looks at the stationarity properties of the real exchange rates which are required for PPP to hold, and it also analyses the presence of cointegration between the nominal exchange rate and domestic and foreign prices. Overall, the results provide evidence in favor of PPP.

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Publisher Info
Paper provided by Instituto de Estudios Fiscales in its series Working Papers with number 24-05 Classification-JEL : C23, F31, G15..

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Handle: RePEc:hpe:wpaper:y:2005:i:24

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Related research
Keywords: purchasing power parity; exchange rates; OECD; stationarity; cointegration; panel data.;

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  7. Coakley, Jerry & Fuertes, Ana-Marie, 2000. "Is There a Base Currency Effect in Long-Run PPP?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 5(4), pages 253-63, October. [Downloadable!] (restricted)
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  14. Gengenbach,Christian & Palm,Franz & Urbain,Jean-Pierre, 2004. "Panel Unit Root Tests in the Presence of Cross-Sectional Dependencies: Comparison and Implications for Modelling," Research Memoranda 040, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization. [Downloadable!]
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  19. Karlsson, Sune & Lothgren, Mickael, 2000. "On the power and interpretation of panel unit root tests," Economics Letters, Elsevier, vol. 66(3), pages 249-255, March. [Downloadable!] (restricted)
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