Re-examining Purchasing Power Parity for the Australian Real Exchange Rate

Mübariz Hasanov

No 20124, Hacettepe University Department of Economics Working Papers from Hacettepe University, Department of Economics

Abstract: In this paper, we re-examine stationarity of the Australian real exchange rate (RER). For this purpose, we modify the test of Kapetanios et al. [Testing for a unit root in the nonlinear STAR framework. Journal of Econometrics 112 (2003), 359-379] to allow for a nonlinear trend function in the data generating process. Using bootstrap techniques, we show that the null hypothesis of unit root can be rejected, providing evidence in favour of PPP proposition for the Australian RER.

Keywords: Purchasing Power Parity; Nonlinearity; Unit Root (search for similar items in EconPapers)
JEL-codes: C12 C22 F31 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2012
New Economics Papers: this item is included in nep-opm
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