PPP over a century: Co-integration and structural change
The purpose of this paper is to investigate the ability of parameter instability tests in regressions with 1(1) processes to discriminate between changes in the cointegrating relationship and changes in the marginal distribution of the regressors. Using annual data for the G-7 countries and the Purchasing Power Parity, we conclude that the regression coefficient between the price level differential and the exchange rate has indeed remained stable during the 20th century and find ample evidence supporting the PPP.
|Date of creation:||2006|
|Date of revision:|
|Contact details of provider:|| Postal: Maynooth, Co. Kildare|
Web page: http://www.maynoothuniversity.ie/economics-finance-and-accounting
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877R, Cowles Foundation for Research in Economics, Yale University, revised Jul 1989.
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- Pierre Perron, 2005. "Dealing with Structural Breaks," Boston University - Department of Economics - Working Papers Series WP2005-017, Boston University - Department of Economics.
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