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An Alternative Test of Purchasing Power Parity

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  • Frederick H. Wallace

    (Prairie View A&M University)

  • Gary L. Shelley

    (East Tennessee State University)

Abstract

The long-horizon approach of Fisher and Seater (1993) is applied to the data developed by Taylor (2002) to test for purchasing power parity (PPP). Even after accounting for the low power of the test, the evidence is generally supportive of PPP.

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File URL: http://128.118.178.162/eps/if/papers/0502/0502009.pdf
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Bibliographic Info

Paper provided by EconWPA in its series International Finance with number 0502009.

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Length: 12 pages
Date of creation: 14 Feb 2005
Date of revision:
Handle: RePEc:wpa:wuwpif:0502009

Note: Type of Document - doc; pages: 12. 12 pages, MS Word (2003) file
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Web page: http://128.118.178.162

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Keywords: Purchasing power parity; Fisher-Seater test;

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References

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  1. Graham Elliott & Thomas J. Rothenberg & James H. Stock, 1992. "Efficient Tests for an Autoregressive Unit Root," NBER Technical Working Papers 0130, National Bureau of Economic Research, Inc.
  2. Denis Kwiatkowski & Peter C.B. Phillips & Peter Schmidt, 1991. "Testing the Null Hypothesis of Stationarity Against the Alternative of a Unit Root: How Sure Are We That Economic Time Series Have a Unit Root?," Cowles Foundation Discussion Papers 979, Cowles Foundation for Research in Economics, Yale University.
  3. Alan M. Taylor, 2000. "A Century of Purchasing-Power Parity," NBER Working Papers 8012, National Bureau of Economic Research, Inc.
  4. Alan M. Taylor & Mark P. Taylor, 2004. "The Purchasing Power Parity Debate," NBER Working Papers 10607, National Bureau of Economic Research, Inc.
  5. Kenneth Rogoff, 1996. "The Purchasing Power Parity Puzzle," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 647-668, June.
  6. Patrick J. Coe & James M. Nason, 2004. "Long-run monetary neutrality and long-horizon regressions," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(3), pages 355-373.
  7. Donald W.K. Andrews, 1986. "Power in Econometric Applications," Cowles Foundation Discussion Papers 800, Cowles Foundation for Research in Economics, Yale University.
  8. Serletis, Apostolos & Gogas, Periklis, 2004. "Long-horizon regression tests of the theory of purchasing power parity," Journal of Banking & Finance, Elsevier, vol. 28(8), pages 1961-1985, August.
  9. Fisher, Mark E & Seater, John J, 1993. "Long-Run Neutrality and Superneutrality in an ARIMA Framework," American Economic Review, American Economic Association, vol. 83(3), pages 402-15, June.
  10. Coe, Patrick J. & Nason, James M., 2003. "The long-horizon regression approach to monetary neutrality: how should the evidence be interpreted?," Economics Letters, Elsevier, vol. 78(3), pages 351-356, March.
  11. Mark P. Taylor, 1995. "The Economics of Exchange Rates," Journal of Economic Literature, American Economic Association, vol. 33(1), pages 13-47, March.
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Citations

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Cited by:
  1. repec:ebl:ecbull:v:6:y:2008:i:33:p:1-8 is not listed on IDEAS
  2. Miguel de Carvalho & Paulo Julio, 2010. "Digging Out the PPP Hypothesis: an Integrated Empirical Coverage," GEE Papers 0024, Gabinete de Estratégia e Estudos, Ministério da Economia e da Inovação, revised Sep 2010.
  3. Wallace, Frederick, 2009. "Purchasing power parity in Mexico: a historical note," MPRA Paper 18081, University Library of Munich, Germany.
  4. Joe Cox, 2008. "Purchasing power parity and cultural convergence: evidence from the global video games market," Journal of Cultural Economics, Springer, vol. 32(3), pages 201-214, September.
  5. Wallace, Frederick, 2009. "Cointegration tests of purchasing power parity," MPRA Paper 18079, University Library of Munich, Germany.
  6. Frederick Wallace, 2008. "Nonlinear unit root tests of PPP using long-horizon data," Economics Bulletin, AccessEcon, vol. 6(33), pages 1-8.
  7. Tarkan Cavusoglu & Erdinc Telatar, 2011. "Purchasing Power Parity Revisited: A Time-Varying Parameter Approach," Economics Bulletin, AccessEcon, vol. 31(3), pages 2701-2708.
  8. Wallace, Frederick & Lozano Cortés, René & Cabrera-Castellanos, Luis F., 2008. "Pruebas de cointegración de paridad de poder adquisitivo
    [Cointegration Tests of Purchasing Power Parity]
    ," MPRA Paper 10011, University Library of Munich, Germany.
  9. Simpson, Marc W. & Grossmann, Axel, 2014. "An examination of the forward prediction error of U.S. dollar exchange rates and how they are related to bid-ask spreads, purchasing power parity disequilibria, and forward premium asymmetry," The North American Journal of Economics and Finance, Elsevier, vol. 28(C), pages 221-238.
  10. repec:ebl:ecbull:v:6:y:2007:i:31:p:1-9 is not listed on IDEAS
  11. Mario Gómez Aguirre & José Carlos A. Rodríguez Chávez, 2012. "Análisis de la paridad del poder de compra: evidencia empírica entre México y Estados Unidos," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 27(1), pages 169-207.
  12. Mohsen Bahmani-Oskooee & Su Zhou & Ali Kutan, 2007. "A Century of Purchasing Power Parity: Further Evidence," Economics Bulletin, AccessEcon, vol. 6(31), pages 1-9.
  13. Shelley, Gary & Wallace, Frederick, 2007. "Co-movements in international dollar price levels," MPRA Paper 4133, University Library of Munich, Germany.
  14. Manuel Gómez-Zaldívar & Daniel Ventosa-Santaulària & Frederick Wallace, 2013. "The PPP hypothesis and structural breaks: the case of Mexico," Empirical Economics, Springer, vol. 45(3), pages 1351-1359, December.
  15. Dimitriou, Dimitrios & Simos, Theodore, 2013. "Testing purchasing power parity for Japan and the US: A structural-break approach," Japan and the World Economy, Elsevier, vol. 28(C), pages 53-59.

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