Reexaiming the Long-run Purchasing Power Parity:the Application of More Powerful Unit Root Tests

• Main Authors: Yi-Fang Lee, 李宜芳
• Other Authors: Ching-Chuan Tsong
• Format: Others
• Language: zh-TW
• Published: 2005
• Online Access: http://ndltd.ncl.edu.tw/handle/ctcvqt

碩士 === 國立暨南國際大學 === 經濟學系 === 93 === This paper reexamines the issue of long-run Purchasing Power Parity (PPP) using unit root tests with good size and power in the framework of confirmatory analysis. PPP states that the exchange rate adjusted price levels in two countries should be the same under the long run. The most common way to test the PPP relationship is to apply the Panel unit root tests to the real exchange rate. However, using Panel unit root tests have to keep an eye on the problem of cross-sectional dependency in the panel data and the problem of hypothesis in null and alternative. We use univariate and covariate unit root tests on annual U.S dollar real exchange rates from 1948 to 2003 to investigate PPP. The results reveal that only the real exchange rate of Japan and Switzerland are not mean-reverting among nineteen countries. Most of them are able to explain the PPP is hold.