Using data since 1820 for the US, the UK and France, we test for the presence of real effects on the equilibrium real exchange rate (the Harrod-Balassa-Samuelson, HBS effect) in an explicitly nonlinear framework and allowing for shifts in real exchange rate volatility across nominal regimes. A...

This paper uses multi-country data for the period 1973–1994 to investigate five key equilibrium conditions in international finance—purchasing power parity, the Fisher equation, uncovered interest parity, and the equity-return analogues of the latter two. The results are largely...

In the foreign exchange market, all national currencies are priced in terms of a common numeraire (usually the U.S. dollar); hence, cross-currency correlation is likely to be important in the empirical investigation of stationarity. Recently, the SUR estimator is employed to account for the...

The breakdown of the Bretton Woods system and the adoption of generalised floating exchange rates ushered in a new era of exchange rate volatility and uncer­tainty. This increased volatility lead economists to search for economic models able to describe observed exchange rate behavior. In the...

This paper tests the Purchasing Power Parity Theory of Exchange Rates dealing with Argentinean data for the period 1900-2006. This is equivalent to testing if the Real Exchange Rate is a stationary variable or if its components (the nominal exchange rate and the relative prices) are...

In this article, we develop an analytical general equilibrium model of the equilibrium exchange rate. This theoretical framework allows us to identify the relevant set of variables which determinate the equilibrium exchange rate and to explore how theses variables influence the trajectory of the...

In this paper we investigate purchasing power parity in the CEE and post-War former-Yugoslav states during EU integration process 1994-2006. This work stems from longer term tests of real exchange rate convergence in the former Yugoslavia. This period is of interest on two fronts: First, it...

Looking closely at the PPP argument, it states that the currencies purchasing power should not change when comparing the same basket goods across countries, and these goods should all be tradable. Hence, if PPP is valid at all, it should be captured by the relative price indices that best fits...

The important concept of purchasing power parity (PPP) has a number of practical implications. Our central objective is to examine the stationarity of Turkey’s real exchange rates to test for the empirical validity of PPP. Our results from conventional univariate unit root tests fail to...