Does the purchasing power parity hypothesis hold after 1998?

Emilio Zanetti Chini ()

MPRA Paper from University Library of Munich, Germany

Abstract: We investigate the empirical support to the Purchasing Power Parity hypothesis by using sixteen real exchange rates for the decade 1999-2009. The literature has recently arrived to a solution to the two PPP puzzles if considering the post-Bretton Woods period from 1975 to 1998. Time series-based studies consider few cases, while panel-based studies have been recently criticized. Multivariate and panel cointegration, and nonlinear models are here implemented. The theory is rejected and both the puzzles remain unsolved if considering a linear structure, while a nonlinear scenario seems to allow for a partial solution to the first puzzle.

Keywords: PPP; unit roots; cointegration; nonlinear models; IRF (search for similar items in EconPapers)
JEL-codes: C22 C32 C50 F31 (search for similar items in EconPapers)
Date: 2010-11-15
New Economics Papers: this item is included in nep-opm
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https://mpra.ub.uni-muenchen.de/37418/2/MPRA_paper_37418.pdf revised version (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:27225

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