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.

In this paper, a likelihood ratio approach is taken to derive a test of the economic convergence hypothesis in the context of the linear deterministic trend model. The test is designed to directly address the nonstandard nature of the hypothesis, and is a systematic improvement over existing...

This paper tests the Fisher effect. The analysis is applied to the U.S.A. It contributes to the existing empirical literature in three ways. First, it considers a panel of short term and long term real interest rates between 1960 and 2008. Second, it explores both the presence of unit root and...

This paper examines the validity of both the short-run and long-run purchasing power parity (PPP) hypotheses in the case of the Yen-Dollar exchange rate using two estimation methods, namely, a unit root test and an Autoregressive Distributed Lag (ARDL) cointegration test. Some important findings...

The Taylor rule is estimated under the period 1963Q2 to 1999Q4 using Canadian data and the methodology proposed by Bai and Perron (1998) to estimate regression models with multiple endogenous breaks. Although monetary rules are notorious for suffering from structural instability, recent attempts...

Following Elliott (1999) and Perron and Rodríguez (2003), we develop unit root tests in the context of structural change models using GLS detrended data (Elliott, Rothenberg and Stock, 1996) when the initial observation is drawn from its unconditional distribution. We derive the limiting...

This paper examines the validity of both the short-run and long-run purchasing power parity (PPP) hypotheses in the case of the Yen-Dollar exchange rate using two estimation methods, namely, a unit root test and an Autoregressive Distributed Lag (ARDL) cointegration test. Some important findings...

The inflation problem in China has attracted a great deal of international attention in recent years. This paper examines the time series properties of China's CPI series. It is found that the overall inflation series and the inflation of food, tobacco, clothes, urban transport and urban housing...