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Purchasing power parity and long memory


  • Gawon Yoon


This article examines the validity of purchasing power parity by estimating long memory parameters with recently suggested exact local Whittle estimators of Shimotsu and Phillips (2005). Little evidence is found for stationarity in the real exchange rates spanning more than 100 years from 16 advanced countries. However, most of the estimates of long memory parameters are less than 1, so that they indicate mean-reversion to parity. Hence, purchasing power parity holds for most real exchange rates studied here.

Suggested Citation

  • Gawon Yoon, 2009. "Purchasing power parity and long memory," Applied Economics Letters, Taylor & Francis Journals, vol. 16(1), pages 55-61.
  • Handle: RePEc:taf:apeclt:v:16:y:2009:i:1:p:55-61 DOI: 10.1080/13504850601044961

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    References listed on IDEAS

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    Cited by:

    1. José Manuel Belbute & Alfredo Marvão Pereira, 2016. "Does final energy demand in Portugal exhibit long memory? A fractional integration analysis," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 15(2), pages 59-77, August.
    2. Luis A. Gil-Alana & Jiang Liang, 2011. "The PPP hypothesis in the US/China relationship. Fractional integration, time variation and data frequency," Faculty Working Papers 13/11, School of Economics and Business Administration, University of Navarra.

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