Purchasing power parity in Asian economies: further evidence from rank tests for cointegration
The finding of nonlinear cointegration between Asian exchange rates with the corresponding relatives prices and aggregate price levels based on Breitung’s (2001) nonparametric rank tests reinforces previous validations of Purchasing Power Parity by the parametric testing procedures. Hence, in the long-run Asian exchange rate are in equilibrium with the relevant fundamentals as suggested by the purchasing power parity hypothesis.
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