PPP over a century: Co-integration and structural change

Ekaterini Panopoulou

Economics Department Working Paper Series from Department of Economics, National University of Ireland - Maynooth

Abstract: The purpose of this paper is to investigate the ability of parameter instability tests in regressions with 1(1) processes to discriminate between changes in the cointegrating relationship and changes in the marginal distribution of the regressors. Using annual data for the G-7 countries and the Purchasing Power Parity, we conclude that the regression coefficient between the price level differential and the exchange rate has indeed remained stable during the 20th century and find ample evidence supporting the PPP.

JEL-codes: C22 F31 (search for similar items in EconPapers)
Pages: 8 pages
Date: 2006
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Persistent link: https://EconPapers.repec.org/RePEc:may:mayecw:n1650306

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