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Further evidence on the PPP analysis of the Australian dollar: non-linearities, fractional integration and structural changes

Juan Cuestas and Luis Gil-Alana ()

NBS Discussion Papers in Economics from Economics, Nottingham Business School, Nottingham Trent University

Abstract: The aim of this paper is to analyse the empirical fulfilment of the Purchasing Power Parity (PPP) theory for the Australian dollar. In order to do so we have applied recently developed unit root tests that account for asymmetric adjustment towards the equilibrium (Kapetanios et al., 2003) and fractional integration in the context of structural changes (Robinson, 1994, and Gil-Alana, 2008). Although our results point to the rejection of the PPP hypothesis, we find that the degree of persistence of shocks to the Australian dollar decreases after the 1985 currency crisis.

Keywords: PPP; Real Exchange Rate; Unit Roots; Non-linearities; Fractional integration (search for similar items in EconPapers)
JEL-codes: C32 F15 (search for similar items in EconPapers)
Date: 2009-02
New Economics Papers: this item is included in nep-cba, nep-ifn and nep-opm
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http://www.ntu.ac.uk/__data/assets/pdf_file/0014/3 ... ustralian-dollar.pdf First version, 2009 (application/pdf)

Related works:
Journal Article: Further evidence on the PPP analysis of the Australian dollar: Non-linearities, fractional integration and structural changes (2009) Downloads
Working Paper: Further evidence on the PPP analysis of the Australian dollar. Non-linearities, fractional integration and structural change (2009) Downloads
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