Purchasing power parity in the long-run: evidence from Australia's recent float

George Tawadros

Applied Financial Economics, 2002, vol. 12, issue 9, 625-631

Abstract: This paper examines the properties of proportionality, symmetry and exclusiveness in long-run purchasing power parity (PPP) using monthly observations covering Australia's recent experience with floating exchange rates. Using monthly data over the period 1985-1996, strong evidence is found to support the hypothesis that long-run PPP holds between Australia vis-a-vis the USA, UK and Japan. However, strong evidence against the properties of symmetry and proportionality is found. Furthermore, the results show that the property of exclusiveness cannot be rejected for all three currencies.

Date: 2002
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DOI: 10.1080/09603100010021755

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