Abstract
This paper examines the cointegration property of exchange rates and prices using techniques that have received limited attention in several studies on the validity of the Purchasing Power Parity (PPP) hypothesis. It provides comprehensive evidence on the PPP hypothesis using recent monthly data for 1971 through 2011 (i.e., 492 observations). The paper also explores the symmetry and proportionality conditions in PPP. In addition, estimates of the short-run dynamics are obtained for each country, utilizing the error–correction technique. Results from long-run cointegration analysis, short-run dynamics and half-lives, all provide evidence for long-run PPP. The symmetry condition is largely supported, and when imposed on prices, the proportionality condition is supported in a majority of cases.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
