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Tsangyao Chang, Chia-hao Lee and Pei-I Chou
''Purchasing power parity in G-7 countries: Further evidence based on ADL test for threshold cointegration''
( 2011, Vol. 31 No.2 )
This study applies a newly-developed Autoregressive Distributed Lag (ADL) test for threshold cointegration, proposed by Li and Lee (2010) to test the validity of long-run purchasing power parity (PPP) for G-7 countries over the January 1994 to April 2010. The empirical results indicate that PPP only holds true for Canada and France two countries. Our results have important policy implications for the G-7 countries under study.
Keywords: Purchasing Power Parity; G-7 Countries; ADL Test; Threshold Cointegration
JEL: F3 - International Finance: General
C2 - Single Equation Models; Single Variables: General
Manuscript Received : Nov 28 2010 Manuscript Accepted : Apr 17 2011

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