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Purchasing power parity in the long-run: evidence from Australia's recent float

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  • George Tawadros

Abstract

This paper examines the properties of proportionality, symmetry and exclusiveness in long-run purchasing power parity (PPP) using monthly observations covering Australia's recent experience with floating exchange rates. Using monthly data over the period 1985-1996, strong evidence is found to support the hypothesis that long-run PPP holds between Australia vis-a-vis the USA, UK and Japan. However, strong evidence against the properties of symmetry and proportionality is found. Furthermore, the results show that the property of exclusiveness cannot be rejected for all three currencies.

Suggested Citation

  • George Tawadros, 2002. "Purchasing power parity in the long-run: evidence from Australia's recent float," Applied Financial Economics, Taylor & Francis Journals, vol. 12(9), pages 625-631.
    • Handle: RePEc:taf:apfiec:v:12:y:2002:i:9:p:625-631
    DOI: 10.1080/09603100010021755
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    References listed on IDEAS

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    1. Ricardo, David, 1821. "On the Principles of Political Economy and Taxation," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, edition 3, number ricardo1821.
    2. Blake, William, 1810. "Observations on the Principles which Regulate the Course of Exchange; and on the Present Depreciated State of the Currency," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number blake1810.
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    Cited by:

    1. Kamrul Hassan & Ruhul Salim & Harry Bloch, 2015. "Demographic transition and the real exchange rate in Australia: An empirical investigation," New Zealand Economic Papers, Taylor & Francis Journals, vol. 49(1), pages 62-77, April.
    2. Jerry Coakley & Stuart Snaith, 2006. "Testing for symmetry and proportionality in a European panel," Applied Financial Economics, Taylor & Francis Journals, vol. 16(1-2), pages 63-71.
    3. Dimitrios Sideris, 2006. "Purchasing Power Parity in economies in transition: evidence from Central and East European countries," Applied Financial Economics, Taylor & Francis Journals, vol. 16(1-2), pages 135-143.
    4. Imed Drine & Christophe Rault, 2005. "Can the Balassa-Samuelson theory explain long-run real exchange rate movements in OECD countries?," Applied Financial Economics, Taylor & Francis Journals, vol. 15(8), pages 519-530.

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