A test of long-run purchasing power parity.

DOI10.1016/S0165-1765(01)00488-8MaRDI QIDQ5958685zbMATH OpenFDO

Authors Philip A. Shively

Publication date 3 March 2002

Published in Economics Letters (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1016/S0165-1765(01)00488-8

zbMATH Keywords

Exact pointwise most powerful invariant testPurchasing power parityReal exchange rateUnit root

Mathematics Subject Classification ID

Consumer behavior, demand theory (91B42)

Review text

There is a continuing debate whether purchasing power parity holds as a long-run equilibrium relationship. This note applies an exact small-sample, pointwise most powerful invariant unit root test to annual, long-horizon real exchange rates. This test finds clear and consistent evidence in favor of the true purchasing power parity relationship.

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Cited in

(4)

• A test of purchasing power parity based on the largest principal component of real exchange rates of the main OECD economies
• Inter-temporal purchasing power parity
• Pairwise Tests of Purchasing Power Parity
• Revisiting purchasing power parity in BRICS countries using more powerful quantile unit-root tests with stationary covariates

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