Purchasing power parity in G-7 countries: Further evidence based on ADL test for threshold cointegration

Tsangyao Chang, Chia-hao Lee () and Pei-I Chou ()
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Chia-hao Lee: Department of Finance, National Chung Hsing University
Pei-I Chou: Department of Finance, National Chung Hsing University

Economics Bulletin, 2011, vol. 31, issue 2, 1172-1182

Abstract: This study applies a newly-developed Autoregressive Distributed Lag (ADL) test for threshold cointegration, proposed by Li and Lee (2010) to test the validity of long-run purchasing power parity (PPP) for G-7 countries over the January 1994 to April 2010. The empirical results indicate that PPP only holds true for Canada and France two countries. Our results have important policy implications for the G-7 countries under study.

Keywords: Purchasing Power Parity; G-7 Countries; ADL Test; Threshold Cointegration (search for similar items in EconPapers)
JEL-codes: C2 F3 (search for similar items in EconPapers)
Date: 2011-04-17
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Citations: View citations in EconPapers (1)

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