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Juan Carlos Cuestas and Paulo José Regis
''Testing for PPP in Australia: Evidence from unit root test against nonlinear trend stationarity alternatives''
( 2008, Vol. 3 No.27 )
This paper tests for the empirical fulfilment of PPP in Australia (1977-2004). Previous research focuses on the presence of structural breaks and fails to find any support for PPP (Darne and Hoarau, 2008, Henry and Olekalns, 2002). In contrast, we find that the real exchange rate is stationary once we account for a more general specification of the nonlinear deterministic components based on a Chebishev polynomials approximation.
Keywords: PPP
JEL: C2 - Single Equation Models; Single Variables: General
Manuscript Received : May 16 2008 Manuscript Accepted : May 16 2008

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