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REAL EXCHANGE RATES IN LATIN AMERICA: THE PPP HYPOTHESIS AND FRACTIONAL INTEGRATION

GUGLIELMO MARIA CAPORALE|Luis A. Gil-Alana
경제연구소 (Hanyang Economic Research Institute)|2010.06|Journal of Economic Development|제35권 제2호|pp. 1-21|DOI 10.35866/caujed.2010.35.2.001

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키워드

Real Exchange RatesStructural BreaksPurchasing Power ParityFractional Integration
주제분류경제학

초록

This paper tests for PPP in a group of seventeen Latin American (LA) countries by applying fractional integration techniques to real exchange rate series. Compared to earlier studies on these economies, this approach has the advantage of allowing for non-integer values for the degree of integration, and thus for the possibility of PPP not holding continuously but as a long-run equilibrium condition. Further, breaks in the series are endogenously determined using a procedure based on the least-squares principle. This is particularly crucial in the Latin American countries, which have been affected by several exchange rate crises and policy regime changes. The results, based on different assumptions about the underlying disturbances, are in the majority of cases inconsistent with PPP, even more so when breaks are incorporated: Argentina is the only country for which clear evidence of mean reversion is found in the model including a break, albeit only in the second subsample.

Abstract

This paper tests for PPP in a group of seventeen Latin American (LA) countries by applying fractional integration techniques to real exchange rate series. Compared to earlier studies on these economies, this approach has the advantage of allowing for non-integer values for the degree of integration, and thus for the possibility of PPP not holding continuously but as a long-run equilibrium condition. Further, breaks in the series are endogenously determined using a procedure based on the least-squares principle. This is particularly crucial in the Latin American countries, which have been affected by several exchange rate crises and policy regime changes. The results, based on different assumptions about the underlying disturbances, are in the majority of cases inconsistent with PPP, even more so when breaks are incorporated: Argentina is the only country for which clear evidence of mean reversion is found in the model including a break, albeit only in the second subsample.

참고문헌 (61)

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관련 논문AI추천

Purchasing Power Parity and the Fractional Integration of the Real Exchange Rate: New Evidence for Less Developed CountriesMarkJ.Holmes경제연구소 · Journal of Economic Development2002 · 제27권 제1호Testing PPP for Asian Countries Using Panel Cointegration심성훈한국아시아학회 · 아시아연구2008 · 제11권 제1호PURCHASING POWER PARITY TESTS IN COINTEGRATED PANELS: EVIDENCE FROM NEWLY INDUSTRIALIZED COUNTRIESSMRUTI RANJAN BEHERA경제연구소 · Journal of Economic Development2019 · 제44권 제1호The Yen Real Exchange Rate May Not be Stationary After All: New Evidence from Non-linear Unit-Root Tests김형우, 모영규한국은행 · 경제분석2012 · 제18권 제4호NON-LINEAR ADJUSTMENT PROCESS IN WON/DOLLAR AND WON/YEN REAL EXCHAGE RATES오동환, 홍기택경제연구소 · Journal of Economic Development2009 · 제34권 제2호Time-varying Cointegration Models and Exchange Rate Predictability in Korea박수경, 박철범한국개발연구원 · KDI Journal of Economic Policy2015 · 제37권 제4호

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