A reappraisal of the evidence on PPP : a systematic investigation into MA roots in panel unit root test and their implications /

Panel unit root tests of real exchange rates – as opposed to univariate tests – usually reject non-stationarity. These tests, however, could be biased if the real exchange rate contained MA roots. Indeed, two independent arguments claim that the real exchange rate, being a sum of a stationary and a...

• Main Author: Fischer, Christoph
• Other Authors: Porath, Daniel
• Format: Book
• Language: English
• Published: Frankfurt am Main : Deutsche Bundesbank, 2006
• Series: Discussion paper (Deutsche Bundesbank). Series 1: economic studies ; no. 23/2006
• Subjects: TIPO DE CAMBIO; METODO DE MONTECARLO; PARIDAD DEL PODER ADQUISITIVO; CAMBIO EXTERIOR; PARIDAD DEL PODER DE COMPRA; TEORIA DE LA PARIDAD DEL PODER ADQUISITIVO
• Online Access: http://www.bundesbank.de/Redaktion/EN/Downloads/Publications/Discussion_Paper_1/2006/2006_07_18_dkp_23.pdf?__blob=publicationFile

Table of Contents:

• 1. Introduction
• 2. The two-component structure of the real exchange rate
• 3. Estimating a two-component model of the real exchange rate and preliminary results on (non-)stationary
• 4. How large is the bias? a systematic Monte Carlo investigation into MA roots in panel unit root tests
• 5. Conclusions.