Authors
Yin-Wong Cheung, Kon S Lai
Publication date
1993/2/1
Journal
Journal of international Economics
Volume
34
Issue
1-2
Pages
181-192
Publisher
North-Holland
Description
This paper examines the relevance of long-run purchasing power parity (PPP), which allows for measurement errors, during the recent floating exchange rate period. Previous empirical studies generally fail to find support for long-run PPP over this period. In this paper. In this paper the cointegration property of exchange rates and prices is examined using maximum likelihood procedure, and we find significant evidence favorable to long-run PPP. Further tests for symmetry and proportionality indicate that these two conditions are not generally with the data. The results support the hypothesis of long-run PPP with measurement errors in prices.
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Scholar articles
YW Cheung, KS Lai - Journal of international Economics, 1993