Threshold cointegration and purchasing power parity in the pacific nations |
| |
Authors: | Walter Enders Kamol Chumrusphonlert |
| |
Institution: | Department of Economics , Finance, and Legal Studies, The University of Alabama , PO Box 870244, Tuscaloosa AL 35487-0224, USA |
| |
Abstract: | The paper uses a threshold cointegration methodology to explore the properties of long-run purchasing power parity (PPP) in the Pacific nations. Using Japan and the USA as base countries, it is shown that long-run PPP holds for most Asian countries but that the adjustment mechanism is asymmetric. In contrast to symmetric error-correction models, it is found that asymmetric adjustments of nominal exchange rates play an important role in eliminating deviations from long-run PPP. |
| |
Keywords: | |
|
|