EconPapers    
Economics at your fingertips  
 

NONLINEAR PPP UNDER THE GOLD STANDARD

Ivan Paya () and David Peel

Working Papers. Serie AD from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie)

Abstract: Hegwood and Papell (2002) conclude on the basis of analysis in a linear framework that long-run purchasing power parity (PPP)\ does not hold for sixteen real exchange rate series, analyzed in Diebold, Husted, and Rush (1991) for the period 1792-1913, under the Gold Standard. Rather, purchasing power parity deviations are mean-reverting to a changing equilibrium -a quasi PPP (QPPP) theory. We analyze the real exchange rate adjustment mechanism for their data set assuming a nonlinear adjustment process allowing for both a constant and a mean shifting equilibrium. Our results confirm that real exchange rates at that time were stationary, symmetric, nonlinear processes that revert to a non-constant equilibrium rate. Speeds of adjustment were much quicker when breaks were allowed.

Keywords: Purchasing Power Parity; ESTAR; Bootstrapping. (search for similar items in EconPapers)
JEL-codes: C15 C22 C51 F31 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2004-06
New Economics Papers: this item is included in nep-fmk, nep-his and nep-ifn
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Published by Ivie

Downloads: (external link)
http://www.ivie.es/downloads/docs/wpasad/wpasad-2004-24.pdf Fisrt version / Primera version, 2004 (application/pdf)

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:ivi:wpasad:2004-24

Access Statistics for this paper

More papers in Working Papers. Serie AD from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) Contact information at EDIRC.
Bibliographic data for series maintained by Departamento de Edición ().

 
Page updated 2024-06-18
Handle: RePEc:ivi:wpasad:2004-24