Testing the Purchasing Power Parity Theory: A Case of the Taiwanese Dollar Exchange Rate

From July 1978 to April 1989 Taiwan adopted a snake system by allowing the foreign exchange rate to fluctuate within a narrow band of the centered rate. Using monthly data on the Taiwan dollar/U.S. dollar exchange rate, we show that inference on the purchasing power parity hypothesis is sensitive to whether we incorporate double truncation and autoregressive and moving average error terms into the regression model.

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Year of publication:	1998
Authors:	Tsurumi, Hiroki ; L. Chen, Chyong
Published in:	Journal of Economic Integration. - Department of Economics and Trade. - Vol. 13.1998, p. 232-254
Publisher:	Department of Economics and Trade
Subject:	Purchasing \| Power \| Parity \| Theory

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Type of publication:	Article
Classification:	C20 - Econometric Methods: Single Equation Models. General ; F40 - Macroeconomic Aspects of International Trade and Finance. General
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010840675