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Purchasing power parity in the long-run: evidence from Australia's recent float

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  • George Tawadros

Abstract

This paper examines the properties of proportionality, symmetry and exclusiveness in long-run purchasing power parity (PPP) using monthly observations covering Australia's recent experience with floating exchange rates. Using monthly data over the period 1985-1996, strong evidence is found to support the hypothesis that long-run PPP holds between Australia vis-a-vis the USA, UK and Japan. However, strong evidence against the properties of symmetry and proportionality is found. Furthermore, the results show that the property of exclusiveness cannot be rejected for all three currencies.

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  • George Tawadros, 2002. "Purchasing power parity in the long-run: evidence from Australia's recent float," Applied Financial Economics, Taylor & Francis Journals, vol. 12(9), pages 625-631.
    • Handle: RePEc:taf:apfiec:v:12:y:2002:i:9:p:625-631
    DOI: 10.1080/09603100010021755
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    Cited by:

    1. Kamrul Hassan & Ruhul Salim & Harry Bloch, 2015. "Demographic transition and the real exchange rate in Australia: An empirical investigation," New Zealand Economic Papers, Taylor & Francis Journals, vol. 49(1), pages 62-77, April.
    2. Dimitrios Sideris, 2006. "Purchasing Power Parity in economies in transition: evidence from Central and East European countries," Applied Financial Economics, Taylor & Francis Journals, vol. 16(1-2), pages 135-143.
    3. Imed Drine & Christophe Rault, 2005. "Can the Balassa-Samuelson theory explain long-run real exchange rate movements in OECD countries?," Applied Financial Economics, Taylor & Francis Journals, vol. 15(8), pages 519-530.
    4. Jerry Coakley & Stuart Snaith, 2006. "Testing for symmetry and proportionality in a European panel," Applied Financial Economics, Taylor & Francis Journals, vol. 16(1-2), pages 63-71.

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