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Measuring Half-Lives Using A Non-Parametric Bootstrap Approach

Listed author(s):
  • Guglielmo Maria Caporale


  • Mario Cerrato
  • Nicola Spagnolo

In this paper we extend the Murray and Papell (2002) study by using a non-parametric bootstrap approach which allows for non-normality, and focusing on quarterly real exchange rate in twenty OECD countries in the post-1973 floating period. We run Augmented Dickey-Fuller (ADF) regressions, and estimate the half-lives (and confidence intervals) from the corresponding impulse response functions. Further, we use an approximately median-unbiased estimator of the autoregressive parameters, and report the implied point estimates and confidence intervals. We find that accounting for nonnormality results in even higher estimates of the degree of persistence of PPP deviations,but, as in Murray and Papell (2002), the confidence intervals are so wide that no strong conclusions are warranted on the existence of a PPP puzzle.

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Paper provided by Economics and Finance Section, School of Social Sciences, Brunel University in its series Public Policy Discussion Papers with number 04-13.

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Length: 9 pages
Date of creation: Sep 2004
Handle: RePEc:bru:bruppp:04-13
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Brunel University, Uxbridge, Middlesex UB8 3PH, UK

References listed on IDEAS
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  1. Mario Cerrato & Neil Kellard & Nicholas Sarantis, 2005. "The Purchasing Power Parity Persistence Paradigm: Evidence from Black Currency Markets," Money Macro and Finance (MMF) Research Group Conference 2005 34, Money Macro and Finance Research Group.
  2. 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.
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