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Long Run Real Exchange Rates - A Cointegration Analysis

Author

Listed:
  • Alexius, Annika

    (Department of Economics)

Abstract

Long run purchasing power is tested on 16 OECD countries using data from 1960 to 1994, PPP is rejected for some countries (Canada, Japan, Switzerland, Austria, Italy and Spain) and not rejected for other (Sweden, France, Holland and the United Kingdom). For the latter countries, impulse response functions show that half of a disturbance tot the equilibrium real exchange rate disapperars within three years. The method used is Johansen's maximum likelihood approach to cointegration. Simulations are used to obtain empirical critical values of the tests.

Suggested Citation

  • Alexius, Annika, 1996. "Long Run Real Exchange Rates - A Cointegration Analysis," SSE/EFI Working Paper Series in Economics and Finance 119, Stockholm School of Economics.
    • Handle: RePEc:hhs:hastef:0119
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    Cited by:

    1. Anna Larsson, 2004. "The Swedish real exchange rate under different currency regimes," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 140(4), pages 706-727, December.
    2. Andersson, Andreas & Österholm, Pär, 2001. "The Impact of Demography on the Real Exchange Rate," Working Paper Series 2001:11, Uppsala University, Department of Economics.
    3. Annika Alexius, 1997. "Import prices and nominal exchange rates in Sweden," Finnish Economic Papers, Finnish Economic Association, vol. 10(2), pages 99-107, Autumn.
    4. Söhnke M. Bartram, 2000. "Corporate Risk Management as a Lever for Shareholder Value Creation," Financial Markets, Institutions & Instruments, John Wiley & Sons, vol. 9(5), pages 279-324, December.

    More about this item

    Keywords

    Purchasing power parity; real exchange rates;

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange

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