Breaking Trend Functions in Real Exchange Rates: Evidence from Seventeen OECD Countries |
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Authors: | Apostolos Serletis Grigorios Zimonopoulos |
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Institution: | aThe University of Calgary, Calgary, AL, Canada;bChristopher Newport University, Newport News, VA, USA |
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Abstract: | This paper tests for unit roots in dollar-based and DM-based real exchange rates using quarterly data (from 1957:i to 1995:iv) for seventeen OECD countries. The results show that the unit root hypothesis cannot be rejected even if allowance is made for the possibility of a one-time change in the mean of the series at an unknown point in time. This is evidence against the hypothesis of absolute long-run purchasing power parity over this period. |
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