Financial globalization and purchasing power parity in the G7 countries

Joseph Kargbo

Applied Economics Letters, 2009, vol. 16, issue 1, 69-74

Abstract: Financial globalization has huge opportunities and risks as it transforms supply and demand conditions in various countries. Competent macroeconomic management is needed to address the growing links between national economies and global financial markets. Johansen's cointegration technique was utilized with annual data on exchange rates and four price deflators (e.g. consumer price index, Wholesale Price Index (WPI), food price index and producer price index for manufacturing) to investigate the validity of long-run purchasing power parity in the G7 countries during the 1951 to 2006 period. We found support for purchasing power parity, thereby making it a useful guide for exchange rate policy reforms. Depending on the price index used, adjustment to exchange rate and price shocks take 0.35-8.20 years to return to equilibrium levels.

Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.informaworld.com/openurl?genre=article& ... 40C6AD35DC6213A474B5 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:apeclt:v:16:y:2009:i:1:p:69-74

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEL20

DOI: 10.1080/17446540802360058

Access Statistics for this article

Applied Economics Letters is currently edited by Anita Phillips

More articles in Applied Economics Letters from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().