Journal ArticleDOI
Purchasing Power Parity in the Long Run: A Cointegration Approach
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In this paper, the authors used cointegration analysis to examine purchasing power parity relationships over a long-time horizon and found that the exchange rate is cointegrated strongly with the wholesale price index ratio and somewhat weakly with the consumer price index ratios.Abstract:
This paper utilizes cointegration analysis to examine purchasing power parity relationships over a long-time horizon. The results indicate that the exchange rate is cointegrated strongly with the wholesale price index ratio and somewhat weakly with the consumer price index ratio. The cointegrating coefficient between the exchange rate and the price ratio is close to one when cointegration is confirmed. The hypothesis that the real exchange rate follows a random walk is rejected in most cases. Finally, a new test for common trends finds no such common trends in exchange rates or price ratios. Copyright 1990 by Ohio State University Press.read more
Citations
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Long memory processes and fractional integration in econometrics
TL;DR: A survey and review of the major econometric work on long memory processes, fractional integration, and their applications in economics and finance and some of the definitions of long memory are reviewed.
Posted Content
Exchange rates and fundamentals: Evidence on long-horizon predictability
TL;DR: In this paper, the effect of multiple-period changes in the log exchange rate on the deviation of the log nominal exchange rate from its 'fundamental value' was investigated. But the model was designed to account for small-sample bias and size distortion.
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Real Exchange Rate Behavior: The Recent Float from the Perspective of the Past Two Centuries
James R. Lothian,Mark P. Taylor +1 more
TL;DR: The authors found strong evidence of mean-reverting real exchange rate behavior, using simple, stationary, autoregressive models estimated on pre-float data, and easily outperformed nonstationary real-exchange rate models in dynamic forecasting exercises over the recent float.
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The behavior of real exchange rates during the post-Bretton Woods period
TL;DR: In this paper, the authors proposed a multivariate test whose null hypothesis is violated only when all of the processes in question are stationary, and applied the tests to real exchange rates among the G5 over the recent float.
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Transactions costs and nonlinear adjustment in real exchange rates: an empirical investigation
TL;DR: In this paper, the authors used both monthly data for the interwar period and annual data spanning two centuries to show that the linear model of real exchange rate determination in the presence of transactions costs may be biased against the long-run PPP hypothesis.
References
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Journal ArticleDOI
Co-integration and Error Correction: Representation, Estimation and Testing
TL;DR: The relationship between co-integration and error correction models, first suggested in Granger (1981), is here extended and used to develop estimation procedures, tests, and empirical examples.
Journal ArticleDOI
Distribution of the Estimators for Autoregressive Time Series with a Unit Root
David A. Dickey,Wayne A. Fuller +1 more
TL;DR: In this article, the limit distributions of the estimator of p and of the regression t test are derived under the assumption that p = ± 1, where p is a fixed constant and t is a sequence of independent normal random variables.
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Testing for a Unit Root in Time Series Regression
TL;DR: In this article, the authors proposed new tests for detecting the presence of a unit root in quite general time series models, which accommodate models with a fitted drift and a time trend so that they may be used to discriminate between unit root nonstationarity and stationarity about a deterministic trend.
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Likelihood ratio statistics for autoregressive time series with a unit root
David A. Dickey,Wayne A. Fuller +1 more
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Maximum likelihood estimation and inference on cointegration — with applications to the demand for money
Søren Johansen,Katarina Juselius +1 more
TL;DR: In this paper, the estimation and testing of long-run relations in economic modeling are addressed, starting with a vector autoregressive (VAR) model, the hypothesis of cointegration is formulated as a hypothesis of reduced rank of the long run impact matrix.