Colombian Purchasing Power Parity Analysed Using A Framework of Multivariate Cointegration

Peter Rowland () and Hugo Oliveros

No 2150, Borradores de Economia from Banco de la Republica

Abstract: This paper tests for purchasing power parity (PPP) between Colombia and its main trading partners using the Johansen framework of multivariate cointegration. The tests shows that PPP does not hold in the strong sense, but a clear purchasing power relationship is, nevertheless, shown to exist. The model is, furthermore, shown to have significant forecasting power. It outperforms a random walk in out-of-sample forecasting on the 12 and 24-month horizon but not on the 3 and 6-month horizon.

Pages: 27
Date: 2003-08-31
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:col:000094:002150

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