Is the real effective exchange rate biased against the PPP hypothesis?
AbstractWe show that the use of the real effective exchange rate to test for purchasing power parity, as in Astorga (2012) and other studies, introduces a bias against finding evidence of PPP. The bias is illustrated using unit root tests applied to bilateral real rates.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 42488.
Date of creation: 29 Sep 2012
Date of revision:
PPP; real effective exchange rate; stationarity;
Find related papers by JEL classification:
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- F31 - International Economics - - International Finance - - - Foreign Exchange
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-11-17 (All new papers)
- NEP-MON-2012-11-17 (Monetary Economics)
- NEP-OPM-2012-11-17 (Open Economy Macroeconomic)
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