Is The Real Effective Exchange Rate Biased Against the PPP Hypothesis?

We show that the use of the real effective exchange rate to test for purchasing power parity, as in Astorga (2012) and other studies, is subject to a problem that biases tests against finding evidence of PPP. The problem is illustrated using Astorga´s data on six Latin American countries.

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Year of publication:	2014-02-28
Authors:	Wallace, Frederick H ; Ventosa-santaulària, Daniel ; Gómez-zaldívar, Manuel
Published in:	Economics Bulletin. - AccessEcon, ISSN 1545-2921. - Vol. 34.2014, 1, p. 395-399
Publisher:	AccessEcon
Subject:	PPP \| Real Effective Exchange Rates \| Real Exchange Rates \| Stationarity \| Unit Root \| Cointegration

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Extent:	application/pdf
Type of publication:	Article
Classification:	F3 - International Finance ; C2 - Econometric Methods: Single Equation Models
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010747088