Parity Reversion in Real Exchange Rates During the Post-Bretton Woods Period

Some recent studies suggest the post-Bretton Woods period offers a sample that is far too short to reveal any significant evidence on purchasing power parity reversion in individual series of real exchange rates. This study shows that the post-Bretton Woods data contain substantial information on parity reversion. Two efficient univariate unit-root tests, which require much shorter sample sizes than conventional tests to attain the same statistical power, are applied to individual real exchange rate series to uncover parity reversion. Empirical results show that an efficient unit-root test yields favorable evidence on parity reversion even during the Bretton-Woods era