Long-Run Purchasing Power Parity with Asymmetric Adjustment: Evidence from Mainland China and Taiwan
Tsangyao Chang () and
Chin-Ping Yu Additional contact information Yang-Cheng Lu: Department of Finance, Ming-Chung University, Taipei, Taiwan
Chin-Ping Yu: Department of Finance, National Chi-Nan University, Natung, Taiwan
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.