Using a VECM to test exogeneity and forecastability in the PPP condition

The possibility is explored that purchasing power parity (PPP) can be useful in forecasting exchange rates and/or prices. The first step shows that the spot exchange rate is statistically exogenous in the PPP relationship. The next step investigates the forecastability of the variables in the PPP condition. The results show that a VECM can beat a random walk only in the case of the US price level.

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Year of publication:	1997
Authors:	Norrbin, Stefan ; Reffett, Kevin ; Ji, Yaohua
Published in:	Applied Financial Economics. - Taylor & Francis Journals, ISSN 0960-3107. - Vol. 7.1997, 1, p. 87-95
Publisher:	Taylor & Francis Journals

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Extent:	text/html
Type of publication:	Article
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005637870