Cointegration tests of purchasing power parity

Frederick Wallace

Review of World Economics (Weltwirtschaftliches Archiv), 2013, vol. 149, issue 4, 779-802

Abstract: Im et al. (Unpublished working paper, 2008 ) develop cointegration tests using stationary instrumental variables. Their tests avoid the need to simulate critical values for the cointegration estimations, especially problematic in the presence of a nuisance parameter. Likewise, bootstrapping errors is unnecessary. Using an updated version of the Taylor (Rev Econ Stat 84(1):139–150, 2002 ) data set, the Im et al. (Unpublished working paper, 2008 ) approach is applied to two well-known, single equation cointegration methods to test for purchasing power parity. The estimations with instruments provide evidence of purchasing power parity (PPP) for more than half of the countries studied; but the empirical results, hence conclusions regarding PPP sometimes differ with the choice of instrument. Copyright Kiel Institute 2013

Keywords: Cointegration; Purchasing power parity; Real exchange rates; C22; F31 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s10290-013-0165-2

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