Real exchange rates over the past two centuries: How Important is the Harrod-Balassa-Samuelson effect?

Economic Journal

Volumn 118, Issue 532, 2008, Pages 1742-1763

  Lothian, James R ^a   Taylor, Mark P ^b  

^a FORDHAM UNIVERSITY   (United States)

^b UNIVERSITY OF WARWICK   (United Kingdom)

Author keywords

[No Author keywords available]

Indexed keywords

ECONOMETRICS; GRANGER CAUSALITY TEST; NONLINEARITY; NUMERICAL MODEL; PURCHASING POWER PARITY; REAL EXCHANGE RATE;

EURASIA; EUROPE; FRANCE; NORTH AMERICA; UNITED KINGDOM; UNITED STATES; WESTERN EUROPE;

EID: 52749088506     PISSN: 00130133     EISSN: 14680297     Source Type: Journal    
DOI: 10.1111/j.1468-0297.2008.02188.x     Document Type: Article

References (54)

1. Balassa, B. (1964). 'The purchasing-power parity doctrine: A reappraisal', Journal of Political Economy, vol. 72, pp. 584-96.
2. Baxter, M. and Stockman, A.C. (1989). 'Business cycles and the exchange rate system', Journal of Monetary Economics, vol. 33, pp. 5-38.
3. Clark, G. (2001). 'The secret history of the industrial revolution', unpublished working paper, Department of Economics, University of California at Davis.
4. Cuddington, J.T. and Liang, H. (2000). 'Purchasing power parity over two centuries?', Journal of International Money and Finance, vol. 19, pp. 753-57.
5. Davies, R.B. (1987). 'Hypothesis testing when a nuisance parameter is present only under the alternative', Biometrika, vol. 74, pp. 33-43.
6. Dickey, D.A. and Fuller, W.A. (1981). 'Likelihood ratio statistics for autoregressive time series with a unit root', Journal of the American Statistical Association, vol. 74, pp. 427-31.
7. Eichengreen, B. (1988). 'Real exchange rate behavior under alternative international monetary regimes: Interwar evidence', European Economic Review, vol. 32, pp. 363-71.
8. Eitrheim, O. and Teräsvirta, T. (1996). 'Testing the adequacy of smooth transition autoregressive models', Journal of Econometrics, vol. 74(11), pp. 59-75.
9. Feinstein, C.H. (1972). National Income, Expenditure and Output of the United Kingdom, 1856-1965, Cambridge: Cambridge University Press.
10. Flood, R.P. and Rose, A.K. (1995). 'Fixing exchange rates: A virtual quest for fundamentals', Journal of Monetary Economics, vol. 36(1), pp. 3-37.
11. Frankel, J.A. and Rose, A.K. (1995). 'Empirical research on nominal exchange rates', in (G. Grossman and K. Rogoff, eds.), Handbook of International Economics, vol. 3 pp. 1689-1729, Amsterdam, New York and Oxford: Elsevier, North-Holland.
12. Froot, K.A. and Rogoff, K.S. (1995). 'Perspectives on PPP and long-run real exchange rates', (G. Grossman and K. Rogoff, eds.), Handbook of International Economics, vol. 3 pp. 1647-88, Amsterdam, New York and Oxford: Elsevier, North-Holland.
13. Fuller, W.A. (1976). Introduction to Statistical Time Series, New York: John Wiley.
14. Gallant, A.R., Rossi, P.E. and Tauchen, G. (1993). 'Nonlinear dynamic structures', Econometrica, vol. 61(4), pp. 871-907.
15. Granger, C.W. J. and Teräsvirta, T. (1993). Modelling Nonlinear Economic Relationships, Oxford: Oxford University Press.
16. Hamilton, J.D. (1994). Time Series Analysis, Princeton: Princeton University Press.
17. Hansen, B.E. (1996). 'Inference when a nuisance parameter is not identified under the null hypothesis', Econometrica, vol. 64(2), pp. 413-30.
18. Harrod, R. (1933). International Economics, London: Nisbet and Cambridge University Press.
19. Kilian, L. and Taylor, M.P. (2003). 'Why is it so difficult to beat the random walk forecast of exchange rates?', Journal of International Economics, 60(1), pp. 85-107.
20. Koop, G., Pesaran, M.H. and Potter, S.M. (1996). 'Impulse response analysis in nonlinear multivariate models', Journal of Econometrics, 74(1), pp. 1-32.
21. Lothian, J.R. (1990). 'A century plus of Japanese exchange rate behavior', Japan and the World Economy, vol. 2(1), pp. 47-50.
22. Lothian, J.R. and McCarthy, C.H. (2002). 'Real exchange-rate behaviour under fixed and floating exchange rate regimes', The Manchester School, vol. 70(2), pp. 229-45.
23. Lothian, J.R. and Taylor, M.P. (1996). 'Real exchange rate behavior: The recent float from the perspective of the past two centuries', Journal of Political Economy, vol. 104(3), pp. 488-509.
24. Lothian, J.R. and Taylor, M.P. (2000). 'Purchasing power parity over two centuries: Strengthening the case for real exchange rate stability', Journal of International Money and Finance, vol. 19(5), pp. 759-64.
25. Lundbergh, S., Teräsvirta, T. and van Dijk, D. (2003). 'Time-varying smooth transition autoregressive models', Journal of Bussiness and Economic Statistics, vol. 21(1), pp. 104-21.
26. Maddison, A. (1995). Monitoring the World Economy, 1820-1992, Paris: OECD Development Centre.
27. Mark, N.C. (1990). 'Real and nominal exchange rates in the long run: An empirical investigation', Journal of International Economics, vol. 28(1-2), pp. 115-36.
28. Mitchell, B.R. (1988). British Historical Statistics, Cambridge, New York and Melbourne: Cambridge University Press.
29. Mitchell, B.R. (1998). International Historical Statistics: Europe, 1750-1993, New York: Stockton Press.
30. Mussa, M. (1986). 'Nominal exchange rate regimes and the behavior of the real exchange rate', in (K. Brunner and A.H. Meltzer, eds.), Real Business Cycles, Real Exchange Rates and Actual Policies, pp. 117-23. Amsterdam: North-Holland.
31. Mussa, M. (1990). 'Exchange rates in theory and in reality', Princeton Essays in International Finance, No. 179, Princeton: Princeton University.
32. Newey, W.K. and West, K.D. (1987). 'A simple, positive semi-definite, heteroskedasticity and autocorrelation consistent covariance matrix', Econometrica, vol. 55(3), pp. 703-8.
33. Obstfeld, M, Shambaugh, J. and Taylor, A.M. (2004a). 'The trilemma in history: Tradeoffs among exchange rates, monetary policies and capital mobility'. National Bureau of Economic Research Working Paper No. 10396 (March).
34. Obstfeld, M., Shambaugh, J. and Taylor, A.M. (2004 b). 'Monetary sovereignty, exchange rates and capital controls: The trilemma in the interwar period', National Bureau of Economic Research Working Paper No. 10393 (March).
35. Officer, L.H. (1976a). 'The productivity bias in purchasing power parity: An econometric investigation', International Monetary Fund Staff Papers, vol. 23(3), pp. 545-79.
36. Officer, L.H. (1976b). 'The purchasing power parity theory of exchange rates: A review article', International Monetary Fund Staff Papers, vol. 23(1), pp. 1-60.
37. Paya, I. and Peel, D.A. (2006). 'A new analysis of the determinants of the real dollar-sterling exchange rate, 1871-1994'. Journal of Money, Credit and Banking, vol. 38(8), pp. 1971-90.
38. Perron, P. (1988). 'Trends and random walks in macroeconomic time series: Further evidence from a new approach', Journal of Economic Dynamics and Control, vol. 12(2/3), pp. 297-332.
39. Phillips, P.C.B. and Perron, P. (1988). 'Testing for a unit root in time series regression', Biometrika, vol. 75(2), pp. 335-46.
40. Reinhart, C.M. and Rogoff, K.S. (2004). 'The modern history of exchange rate arrangements: A reinterpretation', Quarterly Journal of Economics, vol. 119(1), pp. 1-48.
41. Rogoff, K.S. (1996). 'The purchasing power parity puzzle', Journal of Economic Literature, vol. 34(2), pp. 647-68.
42. Samuelson, P.A. (1964). 'Theoretical notes on trade problems', Review of Economics and Statistics, vol. 46(2), pp. 145-54.
43. Schwert, G.W. (1989). 'Tests for unit roots: A Monte Carlo investigation', Journal of Business and Economic Statistics, vol. 7(2), pp. 147-59.
44. Taylor, A.M. (2002). 'A century of purchasing power parity', Review of Economics and Statistics, vol. 84(1), pp. 139-50.
45. Taylor, A.M. and Taylor, M.P. (2004). 'The purchasing power parity debate', Journal of Economic Perspectives, vol. 18(4), pp. 135-58.
46. Taylor, M.P. (1988). 'An empirical analysis of long-run purchasing power parity using cointegration techniques', Applied Economics, vol. 20(10), pp. 1369-81.
47. Taylor, M.P. (1995). 'The economics of exchange rates', Journal of Economic Literature, vol. 33(1), pp. 13-47.
48. Taylor, M.P. (2006). 'Real exchange rates and purchasing power parity: mean-reversion in economic thought', Applied Financial Economics, vol. 16 (1-2), pp. 1-17.
49. Taylor, M.P., Peel, D.A. and Sarno, L. (2001). 'Nonlinear mean-reversion in real exchange rates: Towards a solution to the purchasing power parity puzzles', International Economic Review, vol. 42(4), pp. 1015-42.
50. Teräsvirta, T. (1994). 'Specification, estimation and evaluation of smooth transition autoregressive models', Journal of the American Statistical Association, vol. 89(425), pp. 208-18.
51. Teräsvirta, T. (1998). 'Modeling economic relationships with smooth transition regressions', in (A. Ullah, ed.), Handbook of Applied Economic Statistics, pp. 507-52, New York, Basel and Hong Kong: Dekker.
52. Toutain, J.-C. (1987). Le Produit Intérieur Brut de la France de 1789 à1982, Histoire Quantitative de l'Économie Française - série AF, No. 15, Institut des Sciences Mat h́ématiques et Économiques Appliquées.
53. van Dijk, D., Teräsvirta, T. and Franses, P.-H. (2002). 'Smooth transition autoregressive models - a survey of recent developments', Econometric Reviews, vol. 21(1), pp. 1-47.
54. White, H. (1980). 'A heteroskedasticity-consistent covariance matrix estimator and a direct test for heteroskedasticity', Econometrica, vol. 48(4), pp. 817-38.