The Yen Real Exchange Rate may be Stationary after all: Evidence from Non‐linear Unit‐root Tests

Georgios Chortareas and George Kapetanios

Oxford Bulletin of Economics and Statistics, 2004, vol. 66, issue 1, 113-131

Abstract: The empirical literature that tests for purchasing power parity (PPP) by focusing on the stationarity of real exchange rates has so far provided, at best, mixed results. The behaviour of the yen real exchange rate has most stubbornly challenged the PPP hypothesis and deepened this puzzle. This paper contributes to this discussion by providing new evidence on the stationarity of bilateral yen real exchange rates. We employ a non‐linear version of the augmented Dickey–Fuller test, based on an exponentially smooth‐transition autoregressive model (ESTAR) that enhances the power of the tests against mean‐reverting non‐linear alternative hypotheses. Our results suggest that the bilateral yen real exchange rates against the other G7 and Asian currencies were mean reverting during the post‐Bretton Woods era. Thus, the real yen behaviour may not be so different after all but simply perceived to be so because of the use of a restrictive alternative hypothesis in previous tests.

Date: 2004
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (46)

Downloads: (external link)
https://doi.org/10.1046/j.0305-9049.2003.00080.x

Related works:
Working Paper: The yen real exchange rate may be stationary after all: evidence from non-linear unit root tests (2006)
Working Paper: The Yen Real Exchange Rate May Be Stationary after All: Evidence from Nonlinear Unit-Root Tests (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: https://EconPapers.repec.org/RePEc:bla:obuest:v:66:y:2004:i:1:p:113-131

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0305-9049

Access Statistics for this article

Oxford Bulletin of Economics and Statistics is currently edited by Christopher Adam, Anindya Banerjee, Christopher Bowdler, David Hendry, Adriaan Kalwij, John Knight and Jonathan Temple

More articles in Oxford Bulletin of Economics and Statistics from Department of Economics, University of Oxford Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().