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| Frederick H Wallace, Daniel Ventosa-santaulària and Manuel Gómez-zaldívar |
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| ''Is The Real Effective Exchange Rate Biased Against the PPP Hypothesis?'' |
| ( 2014, Vol. 34 No.1 ) |
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| We show that the use of the real effective exchange rate to test for purchasing power parity, as in Astorga (2012) and other studies, is subject to a problem that biases tests against finding evidence of PPP. The problem is illustrated using Astorga´s data on six Latin American countries. |
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| Keywords: PPP, Real Effective Exchange Rates, Real Exchange Rates, Stationarity, Unit Root, Cointegration |
JEL: F3 - International Finance: General
C2 - Single Equation Models; Single Variables: General |
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| Manuscript Received : Jul 11 2013 | | Manuscript Accepted : Feb 28 2014 |
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