Further evidence on the PPP analysis of the Australian dollar. Non-linearities, fractional integration and structural change

Luis Gil-Alana and Juan C. Cuesta
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Juan C. Cuesta: Nottingham Trent University

No 07/09, Faculty Working Papers from School of Economics and Business Administration, University of Navarra

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.

Pages: 32 pages
Date: 2009-11-01
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Citations: View citations in EconPapers (8)

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