Long-run PPP may not hold after all

• 成果类型: Article
• 署名作者: Engel, C
• 署名单位: University of Washington; University of Washington Seattle; National Bureau of Economic Research
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/S0022-1996(99)00011-2
• 发表日期: 2000
• 页码: 243-273
• 关键词: Cointegration; Purchasing power parity; Unit roots

摘要

Recent tests using long data series find evidence in favor of long-run PPP, These tests may have reached the wrong conclusion. Using artificial data calibrated to nominal exchange rates and disaggregated data on prices, we show that tests on long-run PPP have serious size biases. In the baseline case, unit root and cointegrarion tests with a nominal size of 5% have true sizes that range from 0.90 to 0.99 in 100-year long data series, even though there is a permanent component that accounts for 42% of the 100-year forecast variance of the real exchange rate, Tests of stationarity are shown to have very low power in the same circumstances. (C) 2000 Elsevier Science B.V. All rights reserved.