Cointegration tests of purchasing power parity

Nonlinear cointegration: Theory and Application to Purchasing Power Parity

In this paper, we study a smooth-transition type of nonlinear cointegration among a dynamic system, in which the proposed definition nests Engle and Granger (1987)’s linear cointegration. Based on the Smooth Transition Autoregressive (STAR) models, a triangular representation for the nonlinearly cointegrated system is introduced. Furthermore, two tests for nonlinear cointegration are derived in...

Symmetry, Proportionality and the Purchasing Power Parity: Evidence from Panel Cointegration Tests

The objective of this paper is to examine the long-run Purchasing Power Parity hypothesis in a dynamic panel of twenty OECD countries, using recently developed heterogeneous panel cointegration tests that have not been previously applied to PPP. Another contribution is that we investigate the symmetry and proportionality conditions in PPP using likelihood-based inference as suggested by Johanse...

Purchasing Power Parity Tests in Cointegrated Panels

This paper employs recently developed techniques for testing hypotheses in cointegrated panels to test the strong version of purchasing power parity for a panel of post Bretton Woods data. We compare results using fully modiŽ ed and dynamic OLS approaches , and strongly reject the hypothesis . We also introduce a new between-dimensio n dynamic OLS estimator and Ž nd that the between-dimensio n ...

Testing for linear cointegration against nonlinear cointegration: Theory and application to Purchasing power parity

In this thesis, we study a smooth-transition type of nonlinear cointegration among a dynamic system. Base on the Logistic Smooth Transition Autoregressive (LSTAR) models, the definition of cointegration which is extended form Engle and Granger (1987)’s definition of linear cointegration is introduced. Then statistical test for linear cointegration against nonlinear cointegration is derived. The...

Nonlinear Adjustment Towards Purchasing Power Parity