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| Francis Ahking |
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| ''Efficient unit root tests of real exchange rates in the post-Bretton Woods era'' |
| ( 2003, Vol. 6 No.7 ) |
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| We apply the efficient unit root tests of Elliott, Rothenberg, and Stock (1996), and Elliott (1999) to twenty-one real exchange rates using monthly data of the G-7 countries from the post-Bretton Woods floating exchange rate period. Our results indicate that, for eighteen out of the twenty-one real exchange rates, the null hypothesis of a unit root can be rejected at the 10% significance level or better using the the Elliott et al. (1996) test. Using the Elliott (1999) test, we have only nine rejections out of the twenty-one real exchange rates at the 10% significance level or better. We also find no strong evidence to suggest that the use of non-U.S. dollar based real exchange rates tend to produce more favorable result for long-run PPP than the use of U.S. dollar based real exchange rates as Lothian (1998) has concluded. |
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| Keywords: Efficient unit root tests Purchasing power parity |
JEL: F3 - International Finance: General
C5 - Econometric Modeling: General |
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| Manuscript Received : Jul 25 2003 | | Manuscript Accepted : Jul 27 2003 |
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