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Further evidence on the PPP analysis of the Australian dollar: non-linearities, fractional integration and structural changes

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Author Info
Juan Carlos Cuestas
Luís A. Gil-Alana

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Abstract

The aim of this paper is to analyse the empirical fulfilment of the Purchasing Power Parity (PPP) theory for the Australian dollar. In order to do so we have applied recently developed unit root tests that account for asymmetric adjustment towards the equilibrium (Kapetanios et al., 2003) and fractional integration in the context of structural changes (Robinson, 1994, and Gil-Alana, 2008). Although our results point to the rejection of the PPP hypothesis, we find that the degree of persistence of shocks to the Australian dollar decreases after the 1985 currency crisis.

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File URL: http://www.ntu.ac.uk/research/document_uploads/85429.pdf
File Format: application/pdf
File Function: First version, 2009
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Publisher Info
Paper provided by Nottingham Trent University, Nottingham Business School, Economics Division in its series Working Papers with number 2009/3.

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Date of creation: Feb 2009
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Handle: RePEc:nbs:wpaper:2009/3

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Web page: http://www.ntu.ac.uk/nbs

For technical questions regarding this item, or to correct its listing, contact: (Juan Carlos Cuestas).

Related research
Keywords: PPP; Real Exchange Rate; Unit Roots; Non-linearities; Fractional integration;

Find related papers by JEL classification:
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions
F15 - International Economics - - Trade - - - Economic Integration

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This page was last updated on 2009-11-5.

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