IDEAS home Printed from https://ideas.repec.org/p/bru/bruppp/04-13.html
   My bibliography  Save this paper

Measuring Half-Lives Using A Non-Parametric Bootstrap Approach

Author

Listed:
  • Guglielmo Maria Caporale
  • Mario Cerrato
  • Nicola Spagnolo

Abstract

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.

Suggested Citation

  • Guglielmo Maria Caporale & Mario Cerrato & Nicola Spagnolo, 2004. "Measuring Half-Lives Using A Non-Parametric Bootstrap Approach," Public Policy Discussion Papers 04-13, Economics and Finance Section, School of Social Sciences, Brunel University.
  • Handle: RePEc:bru:bruppp:04-13
    as

    Download full text from publisher

    File URL: http://www.brunel.ac.uk/329/efwps/04-13.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Kenneth Rogoff, 1996. "The Purchasing Power Parity Puzzle," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 647-668, June.
    2. Alan M. Taylor & Mark P. Taylor, 2004. "The Purchasing Power Parity Debate," Journal of Economic Perspectives, American Economic Association, vol. 18(4), pages 135-158, Fall.
    3. Atsushi Inoue & Lutz Kilian, 2002. "Bootstrapping Autoregressive Processes with Possible Unit Roots," Econometrica, Econometric Society, vol. 70(1), pages 377-391, January.
    4. Andrews, Donald W K & Chen, Hong-Yuan, 1994. "Approximately Median-Unbiased Estimation of Autoregressive Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(2), pages 187-204, April.
    5. Papell, David H., 1997. "Searching for stationarity: Purchasing power parity under the current float," Journal of International Economics, Elsevier, vol. 43(3-4), pages 313-332, November.
    6. Alan M. Taylor & Mark P. Taylor, 2004. "The Purchasing Power Parity Debate," Journal of Economic Perspectives, American Economic Association, vol. 18(4), pages 135-158, Fall.
    7. Murray, Christian J. & Papell, David H., 2002. "The purchasing power parity persistence paradigm," Journal of International Economics, Elsevier, vol. 56(1), pages 1-19, January.
    8. Andrews, Donald W K, 1993. "Exactly Median-Unbiased Estimation of First Order Autoregressive/Unit Root Models," Econometrica, Econometric Society, vol. 61(1), pages 139-165, January.
    9. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Qian Chen & David E. Giles, 2007. "A Saddlepoint Approximation to the Distribution of the Half-Life Estimator in an Autoregressive Model: New Insights Into the PPP Puzzle," Econometrics Working Papers 0703, Department of Economics, University of Victoria.
    2. Kim, Jae H. & Ji, Philip Inyeob, 2011. "Mean-reversion in international real interest rates," Economic Modelling, Elsevier, vol. 28(4), pages 1959-1966, July.
    3. Kim, Jae H. & Silvapulle, Param & Hyndman, Rob J., 2007. "Half-life estimation based on the bias-corrected bootstrap: A highest density region approach," Computational Statistics & Data Analysis, Elsevier, vol. 51(7), pages 3418-3432, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Murray, Christian J. & Papell, David H., 2002. "The purchasing power parity persistence paradigm," Journal of International Economics, Elsevier, vol. 56(1), pages 1-19, January.
    2. Rossi, Barbara, 2005. "Confidence Intervals for Half-Life Deviations From Purchasing Power Parity," Journal of Business & Economic Statistics, American Statistical Association, vol. 23, pages 432-442, October.
    3. Claude Lopez & Christian J. Murray & David H. Papell, 2013. "Median-unbiased estimation in DF-GLS regressions and the PPP puzzle," Applied Economics, Taylor & Francis Journals, vol. 45(4), pages 455-464, February.
    4. Koedijk, Kees G. & Tims, Ben & van Dijk, Mathijs A., 2011. "Why panel tests of purchasing power parity should allow for heterogeneous mean reversion," Journal of International Money and Finance, Elsevier, vol. 30(1), pages 246-267, February.
    5. Robertson, Raymond & Kumar, Anil & Dutkowsky, Donald H., 2009. "Purchasing Power Parity and aggregation bias for a developing country: The case of Mexico," Journal of Development Economics, Elsevier, vol. 90(2), pages 237-243, November.
    6. Lopez, Claude & Murray, Christian J & Papell, David H, 2005. "State of the Art Unit Root Tests and Purchasing Power Parity," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(2), pages 361-369, April.
    7. Chen, Show-Lin & Wu, Jyh-Lin, 2020. "Revisiting the persistence of real exchange rates," Journal of International Money and Finance, Elsevier, vol. 103(C).
    8. Michele Ca’ Zorzi & Jakub Muck & Michal Rubaszek, 2016. "Real Exchange Rate Forecasting and PPP: This Time the Random Walk Loses," Open Economies Review, Springer, vol. 27(3), pages 585-609, July.
    9. Georgios Chortareas & George Kapetanios, 2013. "How Puzzling Is The Ppp Puzzle? An Alternative Half‐Life Measure Of Convergence To Ppp," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 28(3), pages 435-457, April.
    10. Sofiane H. Sekioua, 2004. "Real interest parity (RIP) over the 20th century: New evidence based on confidence intervals for the dominant root and half-lives of shocks," Money Macro and Finance (MMF) Research Group Conference 2004 91, Money Macro and Finance Research Group.
    11. Michele Ca’ Zorzi & Jakub Muck & Michal Rubaszek, 2016. "Real Exchange Rate Forecasting and PPP: This Time the Random Walk Loses," Open Economies Review, Springer, vol. 27(3), pages 585-609, July.
    12. Jean Imbs & Haroon Mumtaz & Morten O. Ravn & Hélène Rey, 2005. "PPP Strikes Back: Aggregation And the Real Exchange Rate," The Quarterly Journal of Economics, Oxford University Press, vol. 120(1), pages 1-43.
    13. Hyeongwoo Kim & Ippei Fujiwara & Bruce E. Hansen & Masao Ogaki, 2015. "Purchasing Power Parity and the Taylor Rule," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 30(6), pages 874-903, September.
    14. Kim, Jae H. & Silvapulle, Param & Hyndman, Rob J., 2007. "Half-life estimation based on the bias-corrected bootstrap: A highest density region approach," Computational Statistics & Data Analysis, Elsevier, vol. 51(7), pages 3418-3432, April.
    15. Hwa-Taek Lee & Gawon Yoon, 2013. "Does purchasing power parity hold sometimes? Regime switching in real exchange rates," Applied Economics, Taylor & Francis Journals, vol. 45(16), pages 2279-2294, June.
    16. Ca’ Zorzi, Michele & Kolasa, Marcin & Rubaszek, Michał, 2017. "Exchange rate forecasting with DSGE models," Journal of International Economics, Elsevier, vol. 107(C), pages 127-146.
    17. Curran, Michael & Velic, Adnan, 2019. "Real exchange rate persistence and country characteristics: A global analysis," Journal of International Money and Finance, Elsevier, vol. 97(C), pages 35-56.
    18. Christian J. Murray & Hatice Ozer-Balli & David H. Papell, 2006. "PPP Persistence within Sectoral Real Exchange Rate Panels," Papers of the Annual IUE-SUNY Cortland Conference in Economics, in: Oguz Esen & Ayla Ogus (ed.), Proceedings of the Conference on Human and Economic Resources, pages 388-398, Izmir University of Economics.
    19. repec:csg:ajrcwp:05 is not listed on IDEAS
    20. Ahmad Zubaidi Baharumshah & Chan Tze-Haw & Stilianos Fountas, 2007. "Re-examining purchasing power parity for East-Asian currencies: 1976-2002," Applied Financial Economics, Taylor & Francis Journals, vol. 18(1), pages 75-85.
    21. Pesavento, Elena & Rossi, Barbara, 2007. "Impulse response confidence intervals for persistent data: What have we learned?," Journal of Economic Dynamics and Control, Elsevier, vol. 31(7), pages 2398-2412, July.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bru:bruppp:04-13. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: John.Hunter (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.