Are real exchange rates mean reverting? Evidence from a panel of OECD countries

Ozgur Aslan and Levent Korap ()

Applied Economics Letters, 2009, vol. 16, issue 1, 23-27

Abstract: In our article we employ some contemporaneous panel unit root tests (Maddala and Wu, 1999; Im et al., 2003) to examine whether the real exchange rates are mean reverting. Considering a panel of 26 OECD countries from 1987 to 2006 both using monthly and quarterly observations, we find that assuming a panel framework significantly increases the power of unit root tests. As a result, we find that the nonstationarity of the real exchange rate has strongly been rejected in favour of giving support to the purchasing power parity.

Date: 2009
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DOI: 10.1080/13504850701735773

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