Further evidence on the PPP analysis of the Australian dollar. Non-linearities, fractional integration and structural change
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WPnull/09 Further evidence on the PPP analysis of the Australian dollar. Non-linearities, fractional integration and structural change.
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Authors
- Luis A. Gil-Alana(alana@unav.es)
School of Economics and Business Administration, University of Navarra, Spain.
- Juan C. Cuesta ( )
Nottingham Trent University
Abstract
The aim of this paper is to analyze the empirical fulfillment of the Purchasing Power Parity (PPP) theory for the Australian dollar. In order to do so we have applied recently developed unit root tests that account for asymmetric adjustment towards the equilibrium (Kapetanios et al., 2003) and fractional integration in the context of structural changes (Robinson, 1994, and Gil-Alana, 2008). Although our results point to the rejection of the PPP hypothesis, we find that the degree of persistence of shocks to the Australian dollar decreases after the 1985 currency crisis.
Number of Pages:32
Creation Date:2009-11-01
Number:null/09
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