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cointegration test of purchasing power parity: Some international evidence

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Date Issued:
1997
Summary:
This study investigates the existence of long run Purchasing Power Parity (PPP) for the G7 countries (the United States, Canada, Germany, United Kingdom, France, Italy and Japan). Using the unit root test as well as cointegration techniques we have tested the PPP doctrine. The empirical results indicate that both effective exchange rate and consumer price index time series are nonstationary. Furthermore, the relationship between the effective exchange rate and the price level is shown to be in long run equilibrium in the United States, Canada, Japan and Italy but no evidence for PPP can be found for Germany, the United Kingdom and France. Thus, it can be claimed that the United States, Canada and Japan's markets allow the exchange rate to fluctuate freely as opposed to the European markets, since European economies are prone to disturbances (real shocks) that lead to permanent deviations from the PPP.
Title: A cointegration test of purchasing power parity: Some international evidence.
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Name(s): Nitsi, Elisavet I.
Florida Atlantic University, Degree grantor
Yuhn, Ky-hyang, Thesis advisor
Type of Resource: text
Genre: Electronic Thesis Or Dissertation
Date Issued: 1997
Publisher: Florida Atlantic University
Place of Publication: Boca Raton, Fla.
Physical Form: application/pdf
Extent: 72 p.
Language(s): English
Summary: This study investigates the existence of long run Purchasing Power Parity (PPP) for the G7 countries (the United States, Canada, Germany, United Kingdom, France, Italy and Japan). Using the unit root test as well as cointegration techniques we have tested the PPP doctrine. The empirical results indicate that both effective exchange rate and consumer price index time series are nonstationary. Furthermore, the relationship between the effective exchange rate and the price level is shown to be in long run equilibrium in the United States, Canada, Japan and Italy but no evidence for PPP can be found for Germany, the United Kingdom and France. Thus, it can be claimed that the United States, Canada and Japan's markets allow the exchange rate to fluctuate freely as opposed to the European markets, since European economies are prone to disturbances (real shocks) that lead to permanent deviations from the PPP.
Identifier: 9780591625110 (isbn), 15510 (digitool), FADT15510 (IID), fau:12273 (fedora)
Collection: FAU Electronic Theses and Dissertations Collection
Note(s): College of Business
Thesis (M.A.)--Florida Atlantic University, 1997.
Subject(s): Cointegration
Purchasing power parity
Group of Seven countries
Held by: Florida Atlantic University Libraries
Persistent Link to This Record: http://purl.flvc.org/fcla/dt/15510
Sublocation: Digital Library
Use and Reproduction: Copyright © is held by the author, with permission granted to Florida Atlantic University to digitize, archive and distribute this item for non-profit research and educational purposes. Any reuse of this item in excess of fair use or other copyright exemptions requires permission of the copyright holder.
Use and Reproduction: http://rightsstatements.org/vocab/InC/1.0/
Host Institution: FAU
Is Part of Series: Florida Atlantic University Digital Library Collections.