The specification of cross exchange rate equations used to test Purchasing Power Parity

John Hunter () and Mark Simpson

Economics and Finance Discussion Papers from Economics and Finance Section, School of Social Sciences, Brunel University

Abstract: The Article considers the specification of models used to test Purchasing Power Parity when applied to cross exchange rates. Specifically,conventional dynamic models used to test stationarity of the real exchange rate are likely to be misspecified, except when the parameters of each exchange rate equation are the same.

Date: 2004-11
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Working Paper: The specification of cross exchange rate equations used to test Purchasing Power Parity (2004)
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Persistent link: http://EconPapers.repec.org/RePEc:bru:bruedp:04-22

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