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Searching Stationarity in the Real Exchange Rates: Application of the SUR Estimator

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  • Tsung-Wu Ho

Abstract

In the foreign exchange market, all national currencies are priced in terms of a common numeraire (usually the U.S. dollar); hence, cross-currency correlation is likely to be important in the empirical investigation of stationarity. Recently, the SUR estimator is employed to account for the effects of cross-currency correlation on the long-run purchasing power parity. Under the SUR framework, this paper examines the joint unit-root null and the ADF-based panel unit root. Data of 30 currencies, spans from 1980 to 1999, are used for empirical analysis and the results are supportive. Copyright Kluwer Academic Publishers 2002

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  • Tsung-Wu Ho, 2002. "Searching Stationarity in the Real Exchange Rates: Application of the SUR Estimator," Open Economies Review, Springer, vol. 13(3), pages 275-289, July.
    • Handle: RePEc:kap:openec:v:13:y:2002:i:3:p:275-289
    DOI: 10.1023/A:1015295920889
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    1. Ho, Tsung-Wu, 2003. "A re-examination of the unbiasedness forward rate hypothesis using dynamic SUR model," The Quarterly Review of Economics and Finance, Elsevier, vol. 43(3), pages 542-559.
    2. 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, Elsevier, vol. 18(2), pages 137-146, April.
    3. Fischer, Christoph, 2004. "PPP: a Disaggregated View," Discussion Paper Series 1: Economic Studies 2004,07, Deutsche Bundesbank.
    4. Hwa-Taek Lee & Gawon Yoon, 2013. "Does purchasing power parity hold sometimes? Regime switching in real exchange rates," Applied Economics, Taylor & Francis Journals, vol. 45(16), pages 2279-2294, June.
    5. repec:wsr:wpaper:y:2009:i:029 is not listed on IDEAS
    6. Paresh Kumar Narayan, 2006. "Are bilateral real exchange rates stationary? Evidence from Lagrange multiplier unit root tests for India," Applied Economics, Taylor & Francis Journals, vol. 38(1), pages 63-70.
    7. Ho, Tsung-wu, 2008. "Testing seasonal mean-reversion in the real exchange rates: An application of nonlinear IV estimator," Economics Letters, Elsevier, vol. 99(2), pages 314-316, May.
    8. Narayan Paresh K & Prasad Biman Chand, 2005. "The Validity of Purchasing Power Parity Hypothesis for Eleven Middle Eastern Countries," Review of Middle East Economics and Finance, De Gruyter, vol. 3(2), pages 44-58, August.

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