Purchasing Power Parity (PPP) of Australian dollar: Do test procedures matter?

A.F.M.K. Hassan; R. Salim

doi:10.1016/S0313-5926(11)50005-0

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Purchasing Power Parity (PPP) of Australian dollar: Do test procedures matter?

Journal article

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Purchasing Power Parity (PPP) of Australian dollar: Do test procedures matter?

A.F.M.K. Hassan and R. Salim

Economic Analysis and Policy, Vol.41(1), pp.71-81

2011

DOI: https://doi.org/10.1016/S0313-5926(11)50005-0

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Abstract

This simple-article aims to reexamine whether Australia’s real exchange rate is mean reverting in the long run by using quarterly trade weighted indices of real exchange rate data for the period of June 1970 to September 2009. We use the state of the art of several more recent econometric tests for this purpose. The empirical result shows that the non-stationarity of Australia’s real exchange rate cannot be rejected. Thus, our results support the PPP hypothesis in Australia. Our results are contradictory to those of Cuestas and Regis (2008), but conform to those of Darné and Hoarau (2007 and 2008).

Details

Title: Purchasing Power Parity (PPP) of Australian dollar: Do test procedures matter?
Authors/Creators: A.F.M.K. Hassan (Author/Creator) - Curtin University
R. Salim (Author/Creator) - Curtin University
Publication Details: Economic Analysis and Policy, Vol.41(1), pp.71-81
Publisher: Economic Society of Australia (Queensland)
Identifiers: 991005540946807891
Murdoch Affiliation: Murdoch University
Language: English
Resource Type: Journal article

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