Nonlinear trend stationary of real exchange rates: The case of the Mediterranean countries

Juan Cuestas, Javier Ordóñez and Mariam Camarero

Working Papers. Serie AD from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie)

Abstract: The aim of this article is to provide additional evidence on the fulfilment of the Purchasing Power Parity hypothesis in the so-called Mediterranean countries. In order to test for the empirical validity of such hypothesis, we have applied two types of unit root tests. The first group is due to Bierens (1997) who generalizes the alternative hypothesis to nonlinear trend stationarity and, the second is the Leybourne, Newbold and Vougas (1998) approach that uses a nonlinear specification for the intercept and slope in order to detrend the series. The results suggest that the evidence in favour of the Purchasing Power Parity hypothesis increases when we allow for nonlinear alternatives.

Keywords: purchasing power parity; real exchange rate; unit roots; structural change; nonlinearity (search for similar items in EconPapers)
JEL-codes: C22 F31 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2006-12
New Economics Papers: this item is included in nep-ifn
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published by Ivie

Downloads: (external link)
http://www.ivie.es/downloads/docs/wpasad/wpasad-2006-27.pdf Fisrt version / Primera version, 2006 (application/pdf)

Related works:
Journal Article: Nonlinear trend stationarity of real exchange rates: the case of the Mediterranean countries (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ivi:wpasad:2006-27

Access Statistics for this paper

More papers in Working Papers. Serie AD from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) Contact information at EDIRC.
Bibliographic data for series maintained by Departamento de Edición ().