Efficient unit root tests of real exchange rates in the post-Bretton Woods era

Francis Ahking ()

Economics Bulletin, 2003, vol. 6, issue 7, pages 1-12

Abstract: We apply the efficient unit root tests of Elliott, Rothenberg, and Stock (1996), and Elliott (1999) to twenty-one real exchange rates using monthly data of the G-7 countries from the post-Bretton Woods floating exchange rate period. Our results indicate that, for eighteen out of the twenty-one real exchange rates, the null hypothesis of a unit root can be rejected at the 10% significance level or better using the the Elliott et al. (1996) test. Using the Elliott (1999) test, we have only nine rejections out of the twenty-one real exchange rates at the 10% significance level or better. We also find no strong evidence to suggest that the use of non-U.S. dollar based real exchange rates tend to produce more favorable result for long-run PPP than the use of U.S. dollar based real exchange rates as Lothian (1998) has concluded.

Keywords: Efficient unit root tests; Purchasing power parity (search for similar items in EconPapers)
JEL-codes: F3 C5 (search for similar items in EconPapers)
Date: 2003-07-27
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Working Paper: Efficient Unit Root Tests of real Exchange Rates in the Post-Bretton Woods Era (2002)
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