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State of the Art Unit Root Tests and Purchasing Power Parity

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  • Claude Lopez

    ()

  • Christian J. Murray
  • David H. Papell

Abstract

Recently, Taylor (2002) concludes that long run PPP held over the 20th century for a set of 19 long term real exchange rates. We argue that this conclusion is quite sensitive to the use of sub-optimal lag selection in unit root tests. Using superior lag selection methods,we find that long run PPP held for just over half of the real exchange rates in Taylor’s sample.

Suggested Citation

  • Claude Lopez & Christian J. Murray & David H. Papell, 2004. "State of the Art Unit Root Tests and Purchasing Power Parity," University of Cincinnati, Economics Working Papers Series 2004-04, University of Cincinnati, Department of Economics.
  • Handle: RePEc:cin:ucecwp:2004-04
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    References listed on IDEAS

    as
    1. Cheung, Yin-Wong & Lai, Kon S., 2000. "On the purchasing power parity puzzle," Journal of International Economics, Elsevier, vol. 52(2), pages 321-330, December.
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    More about this item

    JEL classification:

    • F3 - International Economics - - International Finance
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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