Is the real effective exchange rate biased against the PPP hypothesis?

Daniel Ventosa-Santaulària, Frederick Wallace and Manuel Gómez-Zaldívar

MPRA Paper from University Library of Munich, Germany

Abstract: We show that the use of the real effective exchange rate to test for purchasing power parity, as in Astorga (2012) and other studies, introduces a bias against finding evidence of PPP. The bias is illustrated using unit root tests applied to bilateral real rates.

Keywords: PPP; real effective exchange rate; stationarity (search for similar items in EconPapers)
JEL-codes: C22 F31 (search for similar items in EconPapers)
Date: 2012-09-29
New Economics Papers: this item is included in nep-mon and nep-opm
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Related works:
Journal Article: Is The Real Effective Exchange Rate Biased Against the PPP Hypothesis? (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:42488

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