Wallace, Frederick (2009): Cointegration tests of purchasing power parity.
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Abstract
In recent work Im, Lee, and Enders (2006) use stationary instrumental variables to test for cointegrating relationships. The advantage of their approach is that the tstatistics are asymptotically standard normal and the familiar critical values of the normal distribution may be used to assess significance. Thus, the test avoids the nuisance parameter problem in single equation regressions for cointegration. Using an updated version of the data set developed by Taylor (2002), the ILE test is compared to three single equation alternatives in testing for purchasing power parity: An error correction model, autoregressive distributed lag model, and the EngleGranger two step procedure. The regressions with instruments provide evidence supportive of PPP for some countries but the empirical results differ across tests and the choice of instrument can affect the results.
Item Type:  MPRA Paper 

Original Title:  Cointegration tests of purchasing power parity 
Language:  English 
Keywords:  Cointegration; purchasing power parity 
Subjects:  C  Mathematical and Quantitative Methods > C2  Single Equation Models ; Single Variables > C20  General F  International Economics > F3  International Finance > F31  Foreign Exchange 
Item ID:  18079 
Depositing User:  Frederick Wallace 
Date Deposited:  26. Oct 2009 09:21 
Last Modified:  12. Feb 2013 01:32 
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URI:  https://mpra.ub.unimuenchen.de/id/eprint/18079 
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