Testing Purchasing Power Parity in Cambodia: Time-Varying Trade Weights in Constructing Real Effective Exchange Rate
نویسندگان
چکیده
The purchasing power parity (PPP) is generally accepted as the exchange rate projection between two countries relative to their inflation rate. However, despites many researches in past years, answer whether PPP holds, remains an on-going debate. prior are criticized for heavy reliance on bilateral which consists of short time-series or uses multilateral real effective (REER) constructed by fixed trade weight. Finally, implementing only most popular unit-root stationary tests such ADF and PP deems diagnose with certain weaknesses, instance, size distortion ascending from heteroscedasticity. main purpose this study, therefore, study holds Cambodia? In paper, alternative test known KPSS incorporated thereof. Avoiding aforementioned problem, time-varying weights Cambodia 1995 2019 employed construct total data points months 295 REER January July instead. result indicates that theory based generated modeled constant trend. thereof also has a mean reverting process.Keywords: Purchasing Power Parity, Real Effective Exchange Rate, Time-Varying Trade Weights, Unit Root TestJEL Classifications: F31, F41, C23DOI: https://doi.org/10.32479/ijefi.10543
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ژورنال
عنوان ژورنال: International Journal of Economics and Financial Issues
سال: 2021
ISSN: ['2146-4138']
DOI: https://doi.org/10.32479/ijefi.10543