Long memory or structural breaks: Can either explain nonstationary real exchange rates under the current float?

Christopher Baum, John Barkoulas and Mustafa Caglayan ()

No 380, Boston College Working Papers in Economics from Boston College Department of Economics

Abstract: This paper considers two potential rationales for the apparent absence of mean reversion in real exchange rates in the post-Bretton Woods era. We allow for (i) fractional integration and (ii) a double mean shift in the real exchange rate process. These methods, applied to CPI-based rates for 17 countries and WPI-based rates for 12 countries, demonstrate that the unit-root hypothesis is robust against both fractional alternatives and structural breaks. This evidence suggests rejection of the doctrine of absolute long-run purchasing power parity during the post-Bretton Woods era.

Keywords: purchasing power parity; long memory; structural breaks (search for similar items in EconPapers)
JEL-codes: C22 F31 (search for similar items in EconPapers)
Pages: 27 pages
Date: 1998-02-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Published, Journal of International Financial Markets, Institutions, and Money, 1999, 9, 359-376.

Downloads: (external link)
http://fmwww.bc.edu/EC-P/wp380.pdf (application/pdf)

Related works:
Journal Article: Long memory or structural breaks: can either explain nonstationary real exchange rates under the current float? (1999)
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: https://EconPapers.repec.org/RePEc:boc:bocoec:380

Access Statistics for this paper

More papers in Boston College Working Papers in Economics from Boston College Department of Economics Boston College, 140 Commonwealth Avenue, Chestnut Hill MA 02467 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christopher F Baum ().