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Purchasing Power Parity and the Canadian Float in the 1950s

Author

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  • Choudhry, Taufiq
  • McNown, Robert
  • Wallace, Myles

Abstract

In this paper, the authors present evidence that neither large differences in inflation nor long time periods are necessary for a finding favorable to purchasing power parity. Evidence from cointegrating regressions and tests of the real exchange rate indicate that purchasing power parity held as a long-run constraint between the United States and Canada for the period 1950:10 to 1961:5. The authors also find that government intervention can distort purchasing power parity over a finite period. Once the data were extended beyond the period of the free float, the evidence is no longer favorable to purchasing power parity. Copyright 1991 by MIT Press.

Suggested Citation

  • Choudhry, Taufiq & McNown, Robert & Wallace, Myles, 1991. "Purchasing Power Parity and the Canadian Float in the 1950s," The Review of Economics and Statistics, MIT Press, vol. 73(3), pages 558-563, August.
    • Handle: RePEc:tpr:restat:v:73:y:1991:i:3:p:558-63
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    Citations

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    Cited by:

    1. Jean-Francois Villeneuve & Jagdish Handa, 2006. "Purchasing Power Parity as a long-term memory process: evidence from Canada," Applied Financial Economics, Taylor & Francis Journals, vol. 16(1-2), pages 109-117.
    2. Aloy, Marcel & Boutahar, Mohamed & Gente, Karine & Péguin-Feissolle, Anne, 2011. "Purchasing power parity and the long memory properties of real exchange rates: Does one size fit all?," Economic Modelling, Elsevier, vol. 28(3), pages 1279-1290, May.
    3. Lucio Sarno & Mark P. Taylor, 2002. "Purchasing Power Parity and the Real Exchange Rate," IMF Staff Papers, Palgrave Macmillan, vol. 49(1), pages 1-5.
    4. Juan Carlos Cuestas & Javier Ordóñez, 2007. "Testing for convergence among Mercosur countries," NBS Discussion Papers in Economics 2007/1, Economics, Nottingham Business School, Nottingham Trent University.
    5. Hall, Stephen G. & Guo, Qian, 2012. "Spatial panel data analysis with feasible GLS techniques: An application to the Chinese real exchange rate," Economic Modelling, Elsevier, vol. 29(1), pages 41-47.
    6. Alba, Joseph D. & Park, Donghyun, 2003. "Purchasing Power Parity in Developing Countries: Multi-Period Evidence Under the Current Float," World Development, Elsevier, vol. 31(12), pages 2049-2060, December.
    7. Chien-Fu Chen & Chien-an Andy Wang & Chung-Hua Shen, 2007. "Does PPP hold for Big Mac price or consumer price index? Evidence from panel cointegration," Economics Bulletin, AccessEcon, vol. 6(16), pages 1-15.
    8. Su Zhou, 1997. "Purchasing Power Parity in High‐Inflation Countries: A Cointegration Analysis of Integrated Variables with Trend Breaks," Southern Economic Journal, John Wiley & Sons, vol. 64(2), pages 450-467, October.
    9. Lucio Sarno, 2005. "Viewpoint: Towards a solution to the puzzles in exchange rate economics: where do we stand?," Canadian Journal of Economics, Canadian Economics Association, vol. 38(3), pages 673-708, August.
    10. Ho, Tsung-wu, 2005. "Investigating the threshold effects of inflation on PPP," Economic Modelling, Elsevier, vol. 22(5), pages 926-948, September.
    11. repec:ebl:ecbull:v:6:y:2007:i:16:p:1-15 is not listed on IDEAS
    12. Sarno, Lucio & Valente, Giorgio, 2006. "Deviations from purchasing power parity under different exchange rate regimes: Do they revert and, if so, how?," Journal of Banking & Finance, Elsevier, vol. 30(11), pages 3147-3169, November.
    13. Murat Doganlar, 1999. "Testing long-run validity of purchasing power parity for Asian countries," Applied Economics Letters, Taylor & Francis Journals, vol. 6(3), pages 147-151.
    14. Iwatsubo, Kentaro & 岩壷, 健太郎 & イワツボ, ケンタロウ, 2006. "Adjustment Speeds of Nominal Exchange Rates and Prices toward Purchasing Power Parity," CEI Working Paper Series 2005-11, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
    15. Francisco Ledesma & Manuel Navarro & Jorge Perez & Simón Sosvilla, 1998. "Purchasing power parity and uncovered interest parity: The Spanish case," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 4(4), pages 335-348, November.
    16. Lucio Sarno, 2003. "Nonlinear Exchange Rate Models: A Selective Overview," Rivista di Politica Economica, SIPI Spa, vol. 93(4), pages 3-46, July-Augu.
    17. Caglayan, Mustafa & Filiztekin, Alpay, 2012. "The law of one price and the role of market structure," MPRA Paper 36975, University Library of Munich, Germany.
    18. Francis Ahking, 1997. "Testing long-run purchasing power parity with a Bayesian unit root approach: the experience of Canada in the 1950s," Applied Economics, Taylor & Francis Journals, vol. 29(6), pages 813-819.
    19. GUO, Qian, 2010. "The Balassa-Samuelson model of purchasing power parity and Chinese exchange rates," China Economic Review, Elsevier, vol. 21(2), pages 334-345, June.
    20. Taylor, Mark P. & Sarno, Lucio, 1998. "The behavior of real exchange rates during the post-Bretton Woods period," Journal of International Economics, Elsevier, vol. 46(2), pages 281-312, December.
    21. Choudhry, Taufiq, 1999. "Purchasing Power Parity in High-Inflation Eastern European Countries: Evidence from Fractional and Harris-Inder Cointegration Tests," Journal of Macroeconomics, Elsevier, vol. 21(2), pages 293-308, April.
    22. Thomas E. Schweigert, 2002. "Nominal And Real Exchange Rates And Purchasing Power Parity During The Guatemalan Float, 1897-1922," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 27(2), pages 127-142, December.

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