Real exchange rates may have nonlinear trends

International Journal of Finance and Economics

Volumn 13, Issue 2, 2008, Pages 158-173

  Cushman, David O ^a,b  

^a UNIVERSITY OF SASKATCHEWAN   (Canada)

^b Department of Economics and Business   (Canada)

Author keywords

Nonlinear trend stationarity; Purchasing power parity; Real exchange rates; Unit roots

Indexed keywords

EXCHANGE RATE; FINANCIAL SYSTEM; MODELING; PURCHASING POWER PARITY; STATISTICAL ANALYSIS;

CENTRAL EUROPE; EURASIA; EUROPE; GERMANY; NORTH AMERICA; UNITED STATES;

EID: 42249113188     PISSN: 10769307     EISSN: 10991158     Source Type: Journal    
DOI: 10.1002/ijfe.322     Document Type: Article

References (44)

1. Balassa B. 1964. The purchasing power parity doctrine: a reappraisal. Journal of Political Economy 72: 584-596.
2. Basci E, Caner M. 2005. Are real exchange rates nonlinear or nonstationary? Evidence from a new threshold unit root test. Studies in Nonlinear Dynamics and Econometrics 9(4, Art. 2): 1-19.
3. Baum CF, Barkoulas JT, Caglayan M. 2001. Nonlinear adjustment to purchasing power parity in the post-Bretton Woods era. Journal of International Money and Finance 20: 379-399.
4. Bhagwati J. 1984. Why are services cheaper in poor countries? Economic Journal 94: 279-280.
5. Bierens H. 1997. Testing the unit root with drift hypothesis against nonlinear trend stationarity, with an application to the U.S. price level and interest rate. Journal of Econometrics 81: 29-64.
6. Bierens H. 2001. Unit roots. In A Companion to Theoretical Econometrics, Baltagi B (ed.). Basil Blackwell: Oxford; 610-633.
7. Campbell JY, Perron P. 1991. Pitfalls and opportunities: what macroeconomists should know about unit roots. In NBER Macroeconomics Annual 1991, Blanchard OJ, Fischer S (eds). MIT Press: Cambridge, MA.
8. Cheung Y-W, Lai K. 1993. Long-run purchasing power parity during the recent float. Journal of International Economics 34: 181-192.
9. Cheung Y-W, Lai K. 1998. Parity reversion in real exchange rates during the post-Bretton Woods period. Journal of International Money and Finance 17: 597-614.
10. Cheung Y-W, Lai K. 2000. On cross-country differences in the persistence of real exchange rates. Journal of International Economics 50: 375-397.
11. Cuddington JT, Liang H. 2000. Purchasing power parity over two centuries? Journal of International Money and Finance 19: 753-757.
12. Cushman DO. 2001. Bayesian and DF-GLS unit root tests of real exchange rates over the current floating period. Economics Bulletin 6(1): 1-7.
13. Cushman DO. 2002. Nonlinear trends and co-trending in Canadian money demand. Studies in Nonlinear Dynamics and Econometrics 6(1, Art. 4): 1-27.
14. Dornbusch R, Vogelsang T. 1991. Real exchange rates and purchasing power parity. In Trade Theory and Economic Reform: North, South, and East, Essays in Honor of Béla Balassa, de Melo J, Sapir A (eds). Basil Blackwell: Cambridge, MA; 3-24.
15. Elliott G, Rothenberg T, Stock J. 1996. Efficient tests for an autoregressive unit root. Econometrica 64: 813-836.
16. Engel C. 1999. Accounting for US real exchange rate changes. Journal of Political Economy 107: 507-538.
17. Engel C. 2000. Long-run PPP may not hold after all. Journal of International Economics 51: 243-273.
18. Frankel J, Rose A. 1996. A panel project on purchasing power parity: mean reversion within and between countries. Journal of International Economics 40: 209-224.
19. Froot K, Rogoff K. 1995. Perspectives on PPP and long-run real exchange rates. In Handbook of International Economics, vol. 3, Grossman G, Rogoff K (eds). North Holland: Amsterdam.
20. Kapetanios G, Shin Y, Snell A. 2003. Testing for a unit root in the nonlinear STAR framework. Journal of Econometrics 112: 359-379.
21. Kravis I, Lipsey R. 1983. Toward an explanation of national price levels. Princeton Studies in International Finance, no. 52.
22. Krugman P, Obstefeld M. 2003. International Economics: Theory and Policy (6th edn). Addison Wesley: Boston.
23. Kuo B-S, Mikkola A. 2001. How sure are we about purchasing power parity? Panel evidence with the null of stationary real exchange rates. Journal of Money, Credit and Banking 33: 767-789.
24. Lopez C, Murray CJ, Papell DH. 2005. State of the art unit root tests and purchasing power parity. Journal of Money, Credit and Banking 37: 361-369.
25. Lothian J, Taylor M. 1996. Real exchange rate behavior: the recent float from the perspective of the last two centuries. Journal of Political Economy 104: 488-509.
26. Lothian J, Taylor M. 2000. Purchasing power parity over two centuries: strengthening the case for real exchange rate stability. A reply to Cuddington and Liang. Journal of International Money and Finance 19: 759-764.
27. MacDonald R. 1993. Long-run purchasing power parity: is it for real? Review of Economics and Statistics 75: 690-695.
28. Ng S, Perron P. 2001. Lag length selection and the construction of unit root tests with good size and power. Econometrica 69: 1519-1554.
29. Ng S, Perron P. 2002. PPP may not hold after all: a further investigation. Annals of Economics and Finance 3: 43-64.
30. O'Connell P. 1998. The overvaluation of purchasing power parity. Journal of International Economics 44: 1-19.
31. Ouliaris S, Park J, Phillips P. 1989. Testing for a unit root in the presence of a maintained trend. In Advances in Econometrics and Modelling, Raj B (ed.). Kluwer: Dordrecht.
32. Papell D. 1997. Searching for stationarity: purchasing power parity under the current float. Journal of International Economics 43: 313-332.
33. Papell D. 2002. The great appreciation, the great depreciation, and the purchasing power parity hypothesis. Journal of International Economics 57: 51-82.
34. Papell D. 2006. The panel purchasing power parity puzzle. Journal of Money, Credit and Banking 38: 447-467.
35. Park J, Choi B. 1988. A new approach to testing for a unit root. CAE Working Paper 88-23, Cornell University.
36. Rogoff K. 1996. The purchasing power parity puzzle. Journal of Economic Literature 34: 647-668.
37. Rudebusch GD. 1993. The uncertain unit root in real GNP. American Economic Review 83: 264-272.
38. Samuelson P. 1964. Theoretical notes on trade problems. Review of Economics and Statistics 46: 145-154.
39. Stock J, Watson M. 1999. Business cycle fluctuations in U.S. macroeconomic time series. In Handbook of Macroeconomics, vol. 1A, Taylor J, Woodford M (eds). Elsevier: Amsterdam.
40. Taylor A. 2002. A century of purchasing power parity. Review of Economics and Statistics 84: 139-150.
41. Taylor M, Peel D, Sarno L. 2001. Nonlinear mean-reversion in real exchange rates: toward a solution to the purchasing power parity puzzles. International Economic Review 42: 1015-1042.
42. Taylor A, Taylor M. 2004. The purchasing power parity debate. Journal of Economic Perspectives 18: 135-158.
43. Taylor M, Sarno L. 1998. The behavior of real exchange rates during the post-Bretton Woods period. Journal of International Economics 46: 281-312.
44. Wu J-L, Wu S. 2001. Is purchasing power parity overvalued? Journal of Money, Credit and Banking 33: 804-812.