A reappraisal of the evidence on PPP : a systematic investigation into MA roots in panel unit root test and their implications /
Fischer, Christoph
A reappraisal of the evidence on PPP : a systematic investigation into MA roots in panel unit root test and their implications / Christoph Fischer, Daniel Porath. - Frankfurt am Main : Deutsche Bundesbank, 2006 - 45 p. - Discussion paper. Series 1: economic studies ; no. 23/2006 . - Discussion paper (Deutsche Bundesbank). Series 1: economic studies ; no. 23/2006 .
Bibliografía: p. 26-27
1. Introduction -- 2. The two-component structure of the real exchange rate -- 3. Estimating a two-component model of the real exchange rate and preliminary results on (non-)stationary -- 4. How large is the bias? a systematic Monte Carlo investigation into MA roots in panel unit root tests -- 5. Conclusions.
Panel unit root tests of real exchange rates – as opposed to univariate tests – usually reject non-stationarity. These tests, however, could be biased if the real exchange rate contained MA roots. Indeed, two independent arguments claim that the real exchange rate, being a sum of a stationary and a non-stationary component, is possibly an ARIMA (1, 1, 1) process. Monte Carlo simulations show, how systematic changes in the parameters of the components, of the test equation and of the correlation matrix affect the size of first and second generation panel unit root tests. Two components of the real exchange rate, the real exchange rate of a single good and a weighted sum of relative prices, are constructed from the data for a panel of countries. Computation of the relevant parameters reveals that panel unit root tests of the real exchange rate are severely oversized, usually much more so than simple ADF tests. Thus, the evidence for PPP from panel unit root tests may be merely due to extreme size biases.
3865581730
TIPO DE CAMBIO
METODO DE MONTECARLO
PARIDAD DEL PODER ADQUISITIVO
CAMBIO EXTERIOR PARIDAD DEL PODER DE COMPRA TEORIA DE LA PARIDAD DEL PODER ADQUISITIVO
332.456
A reappraisal of the evidence on PPP : a systematic investigation into MA roots in panel unit root test and their implications / Christoph Fischer, Daniel Porath. - Frankfurt am Main : Deutsche Bundesbank, 2006 - 45 p. - Discussion paper. Series 1: economic studies ; no. 23/2006 . - Discussion paper (Deutsche Bundesbank). Series 1: economic studies ; no. 23/2006 .
Bibliografía: p. 26-27
1. Introduction -- 2. The two-component structure of the real exchange rate -- 3. Estimating a two-component model of the real exchange rate and preliminary results on (non-)stationary -- 4. How large is the bias? a systematic Monte Carlo investigation into MA roots in panel unit root tests -- 5. Conclusions.
Panel unit root tests of real exchange rates – as opposed to univariate tests – usually reject non-stationarity. These tests, however, could be biased if the real exchange rate contained MA roots. Indeed, two independent arguments claim that the real exchange rate, being a sum of a stationary and a non-stationary component, is possibly an ARIMA (1, 1, 1) process. Monte Carlo simulations show, how systematic changes in the parameters of the components, of the test equation and of the correlation matrix affect the size of first and second generation panel unit root tests. Two components of the real exchange rate, the real exchange rate of a single good and a weighted sum of relative prices, are constructed from the data for a panel of countries. Computation of the relevant parameters reveals that panel unit root tests of the real exchange rate are severely oversized, usually much more so than simple ADF tests. Thus, the evidence for PPP from panel unit root tests may be merely due to extreme size biases.
3865581730
TIPO DE CAMBIO
METODO DE MONTECARLO
PARIDAD DEL PODER ADQUISITIVO
CAMBIO EXTERIOR PARIDAD DEL PODER DE COMPRA TEORIA DE LA PARIDAD DEL PODER ADQUISITIVO
332.456