Is the real effective exchange rate biased against the PPP hypothesis?
Daniel Ventosa-Santaulària (),
Frederick Wallace () and
MPRA Paper from University Library of Munich, Germany
We show that the use of the real effective exchange rate to test for purchasing power parity, as in Astorga (2012) and other studies, introduces a bias against finding evidence of PPP. The bias is illustrated using unit root tests applied to bilateral real rates.
Keywords: PPP; real effective exchange rate; stationarity (search for similar items in EconPapers)
JEL-codes: C22 F31 (search for similar items in EconPapers)
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Journal Article: Is The Real Effective Exchange Rate Biased Against the PPP Hypothesis? (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:42488
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