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Purchasing power parity in G-7 countries: Further evidence based on ADL test for threshold cointegration


  • Tsangyao Chang

    () (Department of Finance, Feng Chia University, Taichung, Taiwan)

  • Chia-hao Lee

    () (Department of Finance, National Chung Hsing University)

  • Pei-I Chou

    () (Department of Finance, National Chung Hsing University)


This study applies a newly-developed Autoregressive Distributed Lag (ADL) test for threshold cointegration, proposed by Li and Lee (2010) to test the validity of long-run purchasing power parity (PPP) for G-7 countries over the January 1994 to April 2010. The empirical results indicate that PPP only holds true for Canada and France two countries. Our results have important policy implications for the G-7 countries under study.

Suggested Citation

  • Tsangyao Chang & Chia-hao Lee & Pei-I Chou, 2011. "Purchasing power parity in G-7 countries: Further evidence based on ADL test for threshold cointegration," Economics Bulletin, AccessEcon, vol. 31(2), pages 1172-1182.
  • Handle: RePEc:ebl:ecbull:eb-10-00766

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    References listed on IDEAS

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    Cited by:

    1. Works, Richard Floyd, 2016. "Econometric modeling of exchange rate determinants by market classification: An empirical analysis of Japan and South Korea using the sticky-price monetary theory," MPRA Paper 76382, University Library of Munich, Germany.

    More about this item


    Purchasing Power Parity; G-7 Countries; ADL Test; Threshold Cointegration;

    JEL classification:

    • F3 - International Economics - - International Finance
    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables


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