Long-Run Purchasing Power Parity with Asymmetric Adjustment: Evidence from Mainland China and Taiwan

Yang-Cheng Lu, Tsangyao Chang () and Chin-Ping Yu
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Yang-Cheng Lu: Department of Finance, Ming-Chung University, Taipei, Taiwan
Chin-Ping Yu: Department of Finance, National Chi-Nan University, Natung, Taiwan

Journal for Economic Forecasting, 2011, issue 3, pages 59-70

Abstract: This study applies threshold cointegration test advanced by Enders and Siklos (2001) to investigate the properties of asymmetric adjustment in long-run purchasing power parity (PPP) for both Mainland China and Taiwan during the January 1986 to October 2009 period. Although there is evidence of long-run PPP for both Mainland China and Taiwan, the adjustment mechanism is asymmetric. These results have important policy implications for both Mainland China and Taiwan under study.

Keywords: threshold cointegration test; Purchasing Power Parity; asymmetric adjustment; Mainland China; Taiwan (search for similar items in EconPapers)
JEL-codes: C22 F31 (search for similar items in EconPapers)
Date: 2011
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