Unit Roots, Nonlinear Cointegration and Purchasing Power Parity

Alfred Haug and Syed Basher ()
Additional contact information
Syed Basher: Department of Economics, York University

Working Papers from York University, Department of Economics

Abstract: We test long¨Crun PPP within a general model of cointegration of linear and nonlinear form. Nonlinear cointegration is tested with rank tests proposed by Breitung (2001). We start with determining the order of integration of each variable in the model, applying relatively powerful DF¨CGLS tests of Elliott, Rothenberg and Stock (1996). Using monthly data from the post¨CBretton Woods era for G¨C10 countries, the evidence leads to a rejection of PPP for almost all countries. In several cases the price variables are driven by permanent shocks that differ from the ones that drive the exchange rate. Also, nonlinear cointegration cannot solve the PPP puzzle.

Keywords: Purchasing power parity; unit roots; nonlinear cointegration (search for similar items in EconPapers)
JEL-codes: C22 F40 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2003-01, Revised 2005-06
New Economics Papers: this item is included in nep-ets and nep-ifn
References: View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://dept.econ.yorku.ca/research/workingPapers/w ... g_Basher_06_2005.pdf First version, 2003

Related works:
Working Paper: Unit Roots, Nonlinear Cointegration and Purchasing Power Parity (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:yca:wpaper:2003_1

Access Statistics for this paper

More papers in Working Papers from York University, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Support ( this e-mail address is bad, please contact ).