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Is The Real Effective Exchange Rate Biased Against the PPP Hypothesis?

Frederick Wallace (), Daniel Ventosa-Santaulària () and Manuel Gómez-Zaldívar

Economics Bulletin, 2014, vol. 34, issue 1, 395-399

Abstract: We show that the use of the real effective exchange rate to test for purchasing power parity, as in Astorga (2012) and other studies, is subject to a problem that biases tests against finding evidence of PPP. The problem is illustrated using Astorga´s data on six Latin American countries.

Keywords: PPP; Real Effective Exchange Rates; Real Exchange Rates; Stationarity; Unit Root; Cointegration (search for similar items in EconPapers)
JEL-codes: F3 C2 (search for similar items in EconPapers)
Date: 2014-02-28
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Working Paper: Is the real effective exchange rate biased against the PPP hypothesis? (2012) Downloads
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