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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.

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Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 31 (2011)
Issue (Month): 2 ()
Pages: 1172-1182

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Handle: RePEc:ebl:ecbull:eb-10-00766
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