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Purchasing power parity and long memory

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  • Gawon Yoon

Abstract

This article examines the validity of purchasing power parity by estimating long memory parameters with recently suggested exact local Whittle estimators of Shimotsu and Phillips (2005). Little evidence is found for stationarity in the real exchange rates spanning more than 100 years from 16 advanced countries. However, most of the estimates of long memory parameters are less than 1, so that they indicate mean-reversion to parity. Hence, purchasing power parity holds for most real exchange rates studied here.

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  • Gawon Yoon, 2009. "Purchasing power parity and long memory," Applied Economics Letters, Taylor & Francis Journals, vol. 16(1), pages 55-61.
    • Handle: RePEc:taf:apeclt:v:16:y:2009:i:1:p:55-61
    DOI: 10.1080/13504850601044961
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    Cited by:

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    2. José Manuel Belbute & Alfredo Marvão Pereira, 2016. "Does final energy demand in Portugal exhibit long memory? A fractional integration analysis," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 15(2), pages 59-77, August.
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