Econometric methods and purchasing power parity: short- and long-run PPP
- 1 November 1998
- journal article
- research article
- Published by Taylor & Francis in Applied Economics
- Vol. 30 (11) , 1443-1457
- https://doi.org/10.1080/000368498324797
Abstract
This paper defines the different versions of the purchasing power parity and establishes the existing relationships between them in the light of econometric techniques. Monthly and annual data for real exchange rates are studied through a variance ratio test. Unlike other authors, it is found that there is not explosive behaviour in the real exchange rate when monthly data are used. Besides, stationarity is easily accepted using annual data. These results allow to reconcile the two main versions of the purchasing power parity and also explain why trade imbalances are persistent but not permanent.Keywords
This publication has 30 references indexed in Scilit:
- Cointegration tests of purchasing power parity: the case of Swiss exchange ratesJournal of International Money and Finance, 1993
- Dynamic Equilibrium and the Real Exchange Rate in a Spatially Separated WorldThe Review of Financial Studies, 1992
- Purchasing power parity as a long‐run relationJournal of Applied Econometrics, 1990
- An international comparison of prices and exchange rates: a new test of purchasing power parityJournal of International Money and Finance, 1990
- Ex ante purchasing power parity: Some evidence based on vector autoregressions in the time domainEmpirical Economics, 1990
- How Big Is the Random Walk in GNP?Journal of Political Economy, 1988
- An empirical examination of long-run purchasing power parity using cointegration techniquesApplied Economics, 1988
- An empirical investigation of the long-run behavior of real exchange ratesCarnegie-Rochester Conference Series on Public Policy, 1987
- Deviations from Purchasing Power Parity in the Long RunThe Journal of Finance, 1983
- Is Real-World Price a Tale Told by the Idiot of Chance?The Review of Economics and Statistics, 1976