Bounds testing cointegration methods and PPP: evidence from 123 Countries

Mohsen Bahmani-Oskooee and Scott Hegerty

Applied Economics Letters, 2010, vol. 17, issue 14, 1335-1340

Abstract: Cointegration analysis is often used in empirical studies of Purchasing Power Parity (PPP) to test whether there is a long-run relationship among countries' bilateral exchange rates and price levels. But the presence of a cointegrated relationship is not enough to support PPP, as other restrictions must be met as well. Nevertheless, even simple cointegration has been rejected for many countries in previous studies. We apply the 'bounds testing' approach of Pesaran et al. (2001), which has only seen limited use thus far, to analyse 123 countries' bilateral rates with the United States. Besides testing for cointegration, we also assess whether our long-run coefficients support the PPP hypothesis. We find that while most rates are indeed cointegrated, only a few have coefficients that meet even one of the necessary restrictions for PPP.

Date: 2010
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.informaworld.com/openurl?genre=article& ... 40C6AD35DC6213A474B5 (text/html)
Access to full text is restricted to subscribers.

Related works:
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:taf:apeclt:v:17:y:2010:i:14:p:1335-1340

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEL20

DOI: 10.1080/13504850902967456

Access Statistics for this article

Applied Economics Letters is currently edited by Anita Phillips

More articles in Applied Economics Letters from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().