Are real exchange rates mean reverting? Evidence from a panel of OECD countries

Levent Korap ()

MPRA Paper from University Library of Munich, Germany

Abstract: In our article we employ some contemporaneous panel unit root tests (Maddala and Wu, 1999; Im et al., 2003) to examine whether the real exchange rates are mean reverting. Considering a panel of 26 OECD countries from 1987 to 2006 both using monthly and quarterly observations, we find that assuming a panel framework significantly increases the power of unit root tests. As a result, we find that the nonstationarity of the real exchange rate has strongly been rejected in favour of giving support to the purchasing power parity.

Keywords: Real Exchange Rates; Panel Unit Root Tests; OECD Economies (search for similar items in EconPapers)
JEL-codes: C22 F31 F41 (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-ifn and nep-opm
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:19527

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