Purchasing Power Parity and the Real Rand-dollar Exchange Rate
نویسنده
چکیده
his paper tests for evidence in support of the purchasing power parity (PPP) in the bilateral real exchange rate series of the South African rand against the US dollar. The importance of considering structural breaks in the PPP test is illustrated. Using standard unit root tests without considering structural breaks, the study is unable to reject the null hypothesis of a unit root in the exchange rate series. However, our additive outlier model clearly demonstrates the importance of multiple sudden structural breaks and supports the stationarity of rand’s real exchange rate against the dollar. As expected the innovative outlier model, which seeks to suggest gradual shifts, only identifies a limited number of breaks and does not support purchasing power parity.
منابع مشابه
Market Structure and the Persistence of Sectoral Real Exchange Rates
We examine the relationship between market structure and the persistence of US dollar-based sectoral real exchange rates for 14 OECD countries. Our empirical results based on disaggregated data suggest that differences in market structure significantly determine the rates at which deviations from sectoral purchasing power parity decay. Specifically, industries with a larger price-cost margin ar...
متن کاملReal Exchange Rates and Time-Varying Trade Costs
In a recent paper Jacks et al. (2008) advocate a micro-founded measure for bilateral trade costs. We employ this measure and extend two nonlinear models for the real exchange rate so as to re-examine the Purchasing Power Parity hypothesis in the presence of time-varying trade costs. Using data for the dollar-sterling real exchange rate from 1830 to 2005, we provide significant evidence in favor...
متن کاملIs the Canadian Dollar in Secular Decline? Empirical Evidence on Purchasing Power Parity and the Links Between Exchange Rate Volatility, Transborder Capital Flows, and News
The slump of the Canadian Dollar against the U.S. Dollar over the last years has led many observers to speculate that the Canadian Dollar is in secular decline, prompting demands for a U.S.-dollarization or even a common currency for North America. However, there is no robust empirical evidence to support the notion of a ‘secular’ decline. An econometric model of the nominal USD/CAD exchange ra...
متن کاملUCLA Anderson School of Management Working Paper Series Impulse Responses of Exchange Rate and Prices under Purchasing Power Parity: Japanese Evidence from An Extracted Inflation-Based Study
The longtime perplexing purchasing power parity (PPP) puzzle has been recently resolved empirically by using the pure price inflation rates extracted and estimated by a pioneering financial-asset pricing approach. Applying the same extracted inflation rates, we estimate a vector error-correction (VEC) model of prices and the Japanese yen per U.S. dollar exchange rate, and find strong evidence s...
متن کاملExchange Rate Volatility in Nigeria: Consistency, Persistency & Severity Analyses
The adoption of the International Monetary Fund (IMF) Structural Adjustment Programme (SAP) in 1986 resulted in the transition from fixed exchange rate regime to floating exchange rate regime in Nigeria. Ever since, the exchange rate of naira vis-à-vis the U.S dollar has attained varying rates all through different time horizons. On this basis, this study examines the consistency, persistency, ...
متن کاملذخیره در منابع من
با ذخیره ی این منبع در منابع من، دسترسی به آن را برای استفاده های بعدی آسان تر کنید
عنوان ژورنال:
دوره شماره
صفحات -
تاریخ انتشار 2006