Efficient Unit Root Tests of real Exchange Rates in the Post-Bretton Woods Era

Francis Ahking ()

No 2002-17, Working papers from University of Connecticut, Department of Economics

Abstract: We apply the efficient unit-roots tests of Elliott, Rothenberg, and Stock (1996), and Elliott (1998) to twenty-one real exchange rates using monthly data of the G-7 countries from the post-Bretton Woods floating exchange rate period. Our results indicate that, for eighteen out of the twenty-one real exchange rates, the null hypothesis of a unit root can be rejected at the 10% significance level or better using the Elliot et al (1996) DF-GLS test. The unit-root null hypothesis is also rejected for one additional real exchange rate when we allow for one endogenously determined break in the time series of the real exchange rate as in Perron (1997). In all, we find favorable evidence to support long-run purchasing power parity in nineteen out of twenty-one real exchange rates. Second, we find no strong evidence to suggest that the use of non-U.S. dollar-based real exchange rates tend to produce more favorable result for long-run PPP than the use of U.S. dollar-based real exchange rates as Lothian (1998) has concluded.

JEL-codes: E31 C22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ets, nep-net and nep-rmg
Date: 2002
View list of references

Downloads: (external link)
http://www.econ.uconn.edu/working/2002-17.pdf Full text (application/pdf)

Related works:
Journal Article: Efficient unit root tests of real exchange rates in the post-Bretton Woods era (2003)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:uct:uconnp:2002-17

Access Statistics for this paper

More papers in Working papers from University of Connecticut, Department of Economics
Address: University of Connecticut 341 Mansfield Road, Unit 1063 Storrs, CT 06269-1063
Contact information at EDIRC.
Series data maintained by Christian Zimmermann ().