Testing the Purchasing Power Parity Theory: A Case of the Taiwanese Dollar Exchange Rate

Hiroki Tsurumi () and Chyong L. Chen
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Hiroki Tsurumi: Rutgers University, Postal: Department of Economics, Rutgers University, New Brunswick, N.J., 08903 U.S.A.
Chyong L. Chen: Feng Chia University, Postal: Feng Chia University

Journal of Economic Integration, 1998, vol. 13, 232-254

Abstract:

From July 1978 to April 1989 Taiwan adopted a snake system by allowing the foreign exchange rate to fluctuate within a narrow band of the centered rate. Using monthly data on the Taiwan dollar/U.S. dollar exchange rate, we show that inference on the purchasing power parity hypothesis is sensitive to whether we incorporate double truncation and autoregressive and moving average error terms into the regression model.

Keywords: Purchasing; Power; Parity; Theory (search for similar items in EconPapers)
JEL-codes: C20 F40 (search for similar items in EconPapers)
Date: 1998
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:ris:integr:0073

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