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Purchasing power parity in Mexico: a historical note

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  • Wallace, Frederick

Abstract

Purchasing power parity has been the subject of many empirical studies. Much of this work has focused on recent history in developed countries. This paper reports results of tests for nonlinear, mean reversion of the real exchange rate for a less-developed country, Mexico, using a previously unexploited data set of monthly observations for 1930-1960. The test results provide weak support for PPP.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 18081.

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Date of creation: 01 Oct 2009
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Handle: RePEc:pra:mprapa:18081

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Keywords: purchasing power parity; nonlinear unit root;

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  1. Claude Lopez & Christian J. Murray & David H. Papell, 2004. "State of the Art Unit Root Tests and Purchasing Power Parity," University of Cincinnati, Economics Working Papers Series, University of Cincinnati, Department of Economics 2004-04, University of Cincinnati, Department of Economics.
  2. Wallace, Frederick H. & Shelley, Gary L., 2006. "An alternative test of purchasing power parity," Economics Letters, Elsevier, Elsevier, vol. 92(2), pages 177-183, August.
  3. Sollis, Robert & Leybourne, Stephen & Newbold, Paul, 2002. "Tests for Symmetric and Asymmetric Nonlinear Mean Reversion in Real Exchange Rates," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 34(3), pages 686-700, August.
  4. Alan M. Taylor & Mark Taylor, 2004. "The Purchasing Power Parity Debate," Working Papers, University of California, Davis, Department of Economics 46, University of California, Davis, Department of Economics.
  5. Juvenal Luciana & Taylor Mark P., 2008. "Threshold Adjustment of Deviations from the Law of One Price," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, De Gruyter, vol. 12(3), pages 1-46, September.
  6. J. V. Perez-Rodriguez & F. Ledesma-Rodriguez & S. Torra-Porras, 2009. "Purchasing power parity and nonlinear adjustment," Applied Economics Letters, Taylor & Francis Journals, Taylor & Francis Journals, vol. 16(1), pages 35-38.
  7. Alan M. Taylor, 2000. "Potential Pitfalls for the Purchasing-Power-Parity Puzzle? Sampling and Specification Biases in Mean-Reversion Tests of the Law of One Price," NBER Working Papers 7577, National Bureau of Economic Research, Inc.
  8. Papell, David H. & Prodan, Ruxandra, 2006. "Additional Evidence of Long-Run Purchasing Power Parity with Restricted Structural Change," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 38(5), pages 1329-1349, August.
  9. Mark P. Taylor, 1995. "The Economics of Exchange Rates," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 33(1), pages 13-47, March.
  10. Chowdhury, Ibrahim & Sarno, Lucio & Taylor, Mark P, 2002. "Non-Linear Dynamics in Deviations from the Law of One Price: A Broad-Based Empirical Study," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3377, C.E.P.R. Discussion Papers.
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Cited by:
  1. Manuel Gómez-Zaldívar & Daniel Ventosa-Santaulària & Frederick Wallace, 2013. "The PPP hypothesis and structural breaks: the case of Mexico," Empirical Economics, Springer, Springer, vol. 45(3), pages 1351-1359, December.

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