Aggregate price indexes, cointegration, and tests of the purchasing power parity hypothesis
In this paper I show that cointegration tests of PPP using aggregate price indexes are not always robust to changes in relative prices. I offer a method of gauging the importance of these effects and find them to be unimportant in recent rejections of PPP.
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- Phillips, Peter C B & Ouliaris, S, 1990.
"Asymptotic Properties of Residual Based Tests for Cointegration,"
Econometric Society, vol. 58(1), pages 165-93, January.
- Tom Doan, . "POTESTRESIDS: RATS procedure to perform Phillips-Ouliaris-Hansen test for Cointegration on 1st stage residuals," Statistical Software Components RTS00248, Boston College Department of Economics.
- Peter C.B. Phillips & Sam Ouliaris, 1987. "Asymptotic Properties of Residual Based Tests for Cointegration," Cowles Foundation Discussion Papers 847R, Cowles Foundation for Research in Economics, Yale University, revised Jul 1988.
- Tom Doan, . "POTEST: RATS procedure to perform Phillips-Ouliaris-Hansen test for Cointegration," Statistical Software Components RTS00247, Boston College Department of Economics.
- Enders, Walter, 1989. "Unit roots and the real exchange rate before World War I: the case of Britain and the USA," Journal of International Money and Finance, Elsevier, vol. 8(1), pages 59-73, March.
- Enders, Walter, 1988. "ARIMA and Cointegration Tests of PPP under Fixed and Flexible Exchange Rate Regimes," The Review of Economics and Statistics, MIT Press, vol. 70(3), pages 504-08, August.
- Layton, Allan P. & Stark, Jonathan P., 1990. "Co-integration as an empirical test of purchasing power parity," Journal of Macroeconomics, Elsevier, vol. 12(1), pages 125-136.
- Corbae, Dean & Ouliaris, Sam, 1988. "Cointegration and Tests of Purchasing Power Parity," The Review of Economics and Statistics, MIT Press, vol. 70(3), pages 508-11, August.
- McNown, Robert & S. Wallace, Myles, 1989. "National price levels, purchasing power parity, and cointegration: a test of four high inflation economies," Journal of International Money and Finance, Elsevier, vol. 8(4), pages 533-545, December.
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