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Long range dependence and the purchasing power parity (in Russian)


  • Oleg Obrezkov

    (VRG Investments, Russia)


The aim of this paper is to explore the purchasing power parity between the United States and Japan. This is done indirectly by estimating fractional integration orders of the aggregate price series in the two countries and nominal and real exchange rates. Our results suggest that both nominal and real exchange rates are well described by conventional I(1)-processes whereas both US and Japan's price levels are around I(1.46). The latter result comes into contradiction with the traditional view that aggregate price series are usually second-order integrated processes. The point estimate of the fractional integration order for the log-difference in price levels in the US and Japan yields the figure 1.33 which is (statistically) smaller than the order 1.46 obtained for the aggregate price series. The latter result may be considered as a (very weak) evidence of the purchasing power parity property: the fractional order of the ratio of the price levels is smaller than that for each price level.

Suggested Citation

  • Oleg Obrezkov, 2007. "Long range dependence and the purchasing power parity (in Russian)," Quantile, Quantile, issue 2, pages 131-140, March.
  • Handle: RePEc:qnt:quantl:y:2007:i:2:p:131-140

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    References listed on IDEAS

    1. Labeaga, Jose M., 1999. "A double-hurdle rational addiction model with heterogeneity: Estimating the demand for tobacco," Journal of Econometrics, Elsevier, vol. 93(1), pages 49-72, November.
    2. John A. Tauras & Patrick M. O'Malley & Lloyd D. Johnston, 2001. "Effects of Price and Access Laws on Teenage Smoking Initiation: A National Longitudinal Analysis," NBER Working Papers 8331, National Bureau of Economic Research, Inc.
    3. John A. Tauras, 1999. "The Transition to Smoking Cessation: Evidence from Multiple Failure Duration Analysis," NBER Working Papers 7412, National Bureau of Economic Research, Inc.
    4. Suranovic, Steven M. & Goldfarb, Robert S. & Leonard, Thomas C., 1999. "An economic theory of cigarette addiction," Journal of Health Economics, Elsevier, vol. 18(1), pages 1-29, January.
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    More about this item


    purchasing power parity; exchange rates; fractional integration;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics


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