Further evidence on the PPP analysis of the Australian dollar. Non-linearities, fractional integration and structural change

  1. Gil Alaña, Luis Alberiko
  2. Cuesta, Juan C.
Journal:
Working Papers ( Universidad de Navarra. Facultad de Ciencias Económicas y Empresariales )

Year of publication: 2009

Issue: 7

Type: Working paper

DIALNET GOOGLE SCHOLAR lock_openOpen access editor

Abstract

The aim of this paper is to analyse the empirical fulfilment 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.

Data source: Dialnet