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Long-run purchasing power parity and long-term memory: evidence from Asian newly industrialized countries

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  • W. L. Chou
  • Y. C. Shih

Abstract

Fractional cointegration in a trivariate model is used to test the long-run purchasing power parity hypothesis in four Asian newly industrialized economies. Critical values for the Geweke-Porter-Hudak tests based on Monte Carlo simulations are provided. Evidence of fractional cointegration arises when a linear trend is included. Subperiod analysis indicates that a shift in the exchange rate regime is likely to affect the results of cointegration tests

Suggested Citation

  • W. L. Chou & Y. C. Shih, 1997. "Long-run purchasing power parity and long-term memory: evidence from Asian newly industrialized countries," Applied Economics Letters, Taylor & Francis Journals, vol. 4(9), pages 575-578.
  • Handle: RePEc:taf:apeclt:v:4:y:1997:i:9:p:575-578
    DOI: 10.1080/135048597355069
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    Citations

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    Cited by:

    1. Choudhry, Taufiq, 1999. "Re-examining forward market efficiency Evidence from fractional and Harris-Inder cointegration tests," International Review of Economics & Finance, Elsevier, vol. 8(4), pages 433-453, November.
    2. Wing-Keung Wong & Aman Agarwal & Jun Du, 2005. "Financial Integration for India Stock Market, a Fractional Cointegration Approach," Departmental Working Papers wp0501, National University of Singapore, Department of Economics.
    3. Heng Chen & Bento J. Lobo & Wing-Keung Wong, 2006. "Links between the Indian, U.S. and Chinese Stock Markets," Departmental Working Papers wp0602, National University of Singapore, Department of Economics.
    4. Emmanuel Dubois & Sandrine Lardic & Valérie Mignon, 2004. "The Exact Maximum Likelihood-Based Test for Fractional Cointegration: Critical Values, Power and Size," Computational Economics, Springer;Society for Computational Economics, vol. 24(3), pages 239-255, July.
    5. repec:ebl:ecbull:v:3:y:2003:i:14:p:1-10 is not listed on IDEAS
    6. Wong Keung-Wing & Habibullah Khan & Jun Du, 2006. "Money, Interest Rate and Stock Prices: New Evidence from Singapore and The United States," Departmental Working Papers wp0601, National University of Singapore, Department of Economics.
    7. Robert Mulligan, 2000. "A fractal analysis of foreign exchange markets," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 6(1), pages 33-49, February.
    8. repec:kap:iaecre:v:6:y:2000:i:1:p:33-49 is not listed on IDEAS
    9. Valérie Mignon & Sandrine Lardic, 2003. "Cointégration fractionnaire entre la consommation et le revenu," Économie et Prévision, Programme National Persée, vol. 158(2), pages 123-142.
    10. Wilson, Peter & Tat, Kua Choon, 2001. "Exchange rates and the trade balance: the case of Singapore 1970 to 19961," Journal of Asian Economics, Elsevier, vol. 12(1), pages 47-63.
    11. Choudhry, Taufiq, 1999. "Purchasing Power Parity in High-Inflation Eastern European Countries: Evidence from Fractional and Harris-Inder Cointegration Tests," Journal of Macroeconomics, Elsevier, vol. 21(2), pages 293-308, April.
    12. Sandrine Lardic & Valérie Mignon, 2004. "Fractional cointegration and the term structure," Empirical Economics, Springer, vol. 29(4), pages 723-736, December.
    13. Zheng Yi & Chen Heng & Wing-Keung Wong, 2009. "China’s Stock Market Integration with a Leading Power and a Close Neighbor," Journal of Risk and Financial Management, MDPI, Open Access Journal, vol. 2(1), pages 1-37, December.

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