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The purchasing power parity revisited : new evidence for 16 OECD countries from panel unit root tests with structural breaks

Narayan, Paresh Kumar 2008, The purchasing power parity revisited : new evidence for 16 OECD countries from panel unit root tests with structural breaks, Journal of international financial markets, institutions and money, vol. 18, no. 2, pp. 137-146.

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Title The purchasing power parity revisited : new evidence for 16 OECD countries from panel unit root tests with structural breaks
Author(s) Narayan, Paresh Kumar
Journal name Journal of international financial markets, institutions and money
Volume number 18
Issue number 2
Start page 137
End page 146
Publisher Elsevier B.V.
Place of publication Amsterdam, The Netherlands
Publication date 2008-04
ISSN 1042-4431
1873-0612
Keyword(s) PPP
real exchange rate
unit root tests
Summary In this paper, we apply a range of univariate unit root tests including the Lagrangian multiplier (LM) univariate and panel unit root tests to examine PPP for 16 OECD countries. In addition to incorporating structural breaks in the univariate exchange rate series, we also incorporate structural breaks in the panel exchange rate models. Our main finding from univariate tests, with and without structural breaks and panel LM test with one break, is that real exchange rates are not stationary, inconsistent with PPP hypothesis. However, when we incorporate two structural breaks in the univariate LM test, for most countries we find that real exchange rates are stationary. Moreover, we obtain overwhelming support for PPP when we apply panel LM unit root tests with two structural breaks.
Language eng
Field of Research 140305 Time-Series Analysis
140212 Macroeconomics (incl Monetary and Fiscal Theory)
HERDC Research category C1.1 Refereed article in a scholarly journal
HERDC collection year 2008
Copyright notice ©2008, Elsevier B.V.
Persistent URL http://hdl.handle.net/10536/DRO/DU:30018539

Document type: Journal Article
Collection: School of Accounting, Economics and Finance
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Created: Tue, 08 Sep 2009, 12:45:59 EST by Leanne Swaneveld