IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

State of the Art Unit Root Tests and Purchasing Power Parity

  • Lopez, Claude
  • Murray, Christian J
  • Papell, David H

Although the question of whether Purchasing Power Parity (PPP) holds in the long run has been extensively studied, the answer is still controversial. Some of the strongest evidence is provided by Taylor (2002), who concludes that long-run PPP held over the twentieth century. We argue that this conclusion is quite sensitive to the use of sub-optimal lag selection in unit root tests. Using superior lag selection methods, we find that long run PPP held for the real exchange rates of only 9 out of the 16 industrialized countries in Taylor's sample with the U.S. dollar as the base currency.

To our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.

Article provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.

Volume (Year): 37 (2005)
Issue (Month): 2 (April)
Pages: 361-69

as
in new window

Handle: RePEc:mcb:jmoncb:v:37:y:2005:i:2:p:361-69
Contact details of provider: Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Lothian, James R & Taylor, Mark P, 1996. "Real Exchange Rate Behavior: The Recent Float from the Perspective of the Past Two Centuries," Journal of Political Economy, University of Chicago Press, vol. 104(3), pages 488-509, June.
  2. Bruce E. Hansen, 1999. "The Grid Bootstrap And The Autoregressive Model," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 594-607, November.
  3. 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.
  4. Glen, Jack D., 1992. "Real exchange rates in the short, medium, and long run," Journal of International Economics, Elsevier, vol. 33(1-2), pages 147-166, August.
  5. Andrews, Donald W K & Chen, Hong-Yuan, 1994. "Approximately Median-Unbiased Estimation of Autoregressive Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(2), pages 187-204, April.
  6. West, Kenneth D., 1987. "A note on the power of least squares tests for a unit root," Economics Letters, Elsevier, vol. 24(3), pages 249-252.
  7. Engel, C., 1996. "Long-Run PPP May Not Hold After All," Discussion Papers in Economics at the University of Washington 96-05, Department of Economics at the University of Washington.
  8. Serena Ng & Pierre Perron, 2001. "LAG Length Selection and the Construction of Unit Root Tests with Good Size and Power," Econometrica, Econometric Society, vol. 69(6), pages 1519-1554, November.
  9. Kenneth Rogoff, 1996. "The Purchasing Power Parity Puzzle," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 647-668, June.
  10. Atsushi Inoue & Lutz Kilian, 2002. "Bootstrapping Autoregressive Processes with Possible Unit Roots," Econometrica, Econometric Society, vol. 70(1), pages 377-391, January.
  11. Murray, Christian J. & Papell, David H., 2002. "The purchasing power parity persistence paradigm," Journal of International Economics, Elsevier, vol. 56(1), pages 1-19, January.
  12. Lutz Kilian & Tao Zha, 2002. "Quantifying the uncertainty about the half-life of deviations from PPP," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 17(2), pages 107-125.
  13. Francis X. Diebold & Steven Husted & Mark Rush, 1990. "Real exchange rates under the gold standard," Discussion Paper / Institute for Empirical Macroeconomics 32, Federal Reserve Bank of Minneapolis.
  14. Alan M. Taylor, 2002. "A Century Of Purchasing-Power Parity," The Review of Economics and Statistics, MIT Press, vol. 84(1), pages 139-150, February.
  15. Abuaf, Niso & Jorion, Philippe, 1990. " Purchasing Power Parity in the Long Run," Journal of Finance, American Finance Association, vol. 45(1), pages 157-74, March.
  16. Rossi, Barbara, 2002. "Confidence Intervals for Half-life Deviations from Purchasing Power Parity," Working Papers 02-08, Duke University, Department of Economics.
  17. Andrews, Donald W K, 1993. "Exactly Median-Unbiased Estimation of First Order Autoregressive/Unit Root Models," Econometrica, Econometric Society, vol. 61(1), pages 139-65, January.
  18. Cheung, Yin-Wong & Lai, Kon S., 1994. "Mean reversion in real exchange rates," Economics Letters, Elsevier, vol. 46(3), pages 251-256, November.
  19. Lutz Kilian, 1999. "Finite-Sample Properties of Percentile and Percentile-t Bootstrap Confidence Intervals for Impulse Responses," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 652-660, November.
  20. Cheung, Yin-Wong & Lai, Kon S., 2000. "On the purchasing power parity puzzle," Journal of International Economics, Elsevier, vol. 52(2), pages 321-330, December.
  21. Lutz Kilian, 1998. "Small-Sample Confidence Intervals For Impulse Response Functions," The Review of Economics and Statistics, MIT Press, vol. 80(2), pages 218-230, May.
  22. Hall, Alastair R, 1994. "Testing for a Unit Root in Time Series with Pretest Data-Based Model Selection," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(4), pages 461-70, October.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:mcb:jmoncb:v:37:y:2005:i:2:p:361-69. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)

or (Christopher F. Baum)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.