Testing for PPP in Australia: evidence from unit root tests against nonlinear trend stationarity alternatives
Juan Cuestas () and
Working Papers from Nottingham Trent University, Nottingham Business School, Economics Division
The aim of this paper is to analyse the empirical fulfilment of the PPP in Australia (1977-2004). Previous research focuses on the presence of structural breaks and fails to find any support to the PPP (Darne and Hoarau, 2008, Henry and Olekalns, 2002). In contrast, we find that the PPP hypothesis holds once we account for a more general specification of the Nonlinear Deterministic components based on a Chebishev polynomials approximation.
Keywords: PPP; Real exchange rates; Unit roots; nonlinearities (search for similar items in EconPapers)
JEL-codes: C32 F15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ifn and nep-opm
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Journal Article: Testing for PPP in Australia: Evidence from unit root test against nonlinear trend stationarity alternatives (2008)
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Persistent link: http://EconPapers.repec.org/RePEc:nbs:wpaper:2008/3
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