The Yen Real Exchange Rate May Be Stationary after All: Evidence from Nonlinear Unit-Root Tests

The empirical literature that tests for purchasing power parity (PPP) by focusing on the stationarity of real exchange rates has so far provided, at best, mixed results. The yen real exchange rate behavior, as compared to other major currencies, has most stubornly challenged the PPP hypothesis and deepened this puzzle. This paper contributes to this discussion by providing new evidence on the stationarity of bilateral yen real exchange rates. We employ a non-linear version of the Augmented Dickey-Fuller test, based on an exponentially smooth-transition autogregressive model (ESTAR) that enhances the power of the tests against mean-reverting nonlinear alternative hypotheses. Our results suggest that the bilateral yen real exchange rates against the other G7 and Asian currencies were mean reverting during the post-Bretton Woods era. Thus, the real yen behavior may not be so different after all but simply perceived to be so due to the use of a restrictive alternative hypothesis in previous tests.PPP, Yen, Real exchange rates, Nonlinear models, ESTAR models

How Puzzling is the PPP Puzzle? An Alternative Half-Life Measure of Convergence to PPP

The lengthy half-lives of real exchange rates in the presence of high degree of exchange rate volatility has been considered as one of the most puzzling empirical regularities in international macroeconomics. This paper suggests that the measure of half-life used in the literature might be problematic and suggests an alternative measure. Empirical analysis suggests that use of the new measure may shed light on the PPP puzzle.PPP, Half life, Real exchange rates

Getting PPP Right: Identifying Mean-Reverting Real Exchange Rates in Panels

Recent advances in testing for the validity of Purchasing Power Parity (PPP) focus on the time series properties of real exchange rates in panel frameworks. One weakness of such tests, however, is that they fail to inform the researcher as to which cross-section units are stationary. As a consequence, a reservation for PPP analyses based on such tests is that a small number of real exchange rates in a given panel may drive the results. In this paper we examine the PPP hypothesis focusing on the stationarity of the real exchange rates in up to 25 OECD countries. We introduce a methodology that when applied to a set of established panel-unit-root tests, allows the identification of the real exchange rates that are stationary. We apply procedures that account for cross-sectional dependence. Our results reveal evidence of mean-reversion that is significantly stronger as compared to that obtained by the existing literature, strengthening the case for PPP. Moreover, our approach can be used to provide half-lives estimates for the mean-reverting real exchange rates. We find that the half-lives are shorter than the literature consensus and therefore that the PPP puzzle is less pronounced than initially thought.PPP, Panel unit root tests, Real exchange rates, Half-lives, PPP puzzle

Getting PPP Right: Identifying Mean-Reverting Real Exchange Rates in Panels

Recent advances in testing for the validity of Purchasing Power Parity (PPP) focus on the time series properties of real exchange rates in panel frameworks. One weakness of such tests, however, is that they fail to inform the researcher as to which cross-section units are stationary. As a consequence, a reservation for PPP analyses based on such tests is that a small number of real exchange rates in a given panel may drive the results. In this paper we examine the PPP hypothesis focusing on the stationarity of the real exchange rates in up to 25 OECD countries. We introduce a methodology that when applied to a set of established panel-unit-root tests, allows to identify the real exchange rates that are stationary and poolable without trading-off any test power. We apply procedures that account for cross-sectional dependence. Our results reveal evidence of mean-reversion that is significantly stronger as compared to those obtained by the existing literature, strengthening the case for PPP. Moreover, our approach allows to provide half-lives estimates for the mean-reverting real exchange rates and so find that the half-lives are shorter than the literature consensus and therefore that the PPP puzzle is less pronounced than initially thought.PPP, Real exchange rates, Half-lives, Panel unit root tests

An Investigation of Current Account Solvency in Latin America Using Non Linear Stationarity Tests

Using a new methodology that allows for nonlinearities, we find frequent support for sustainability in the debt of a set of Latin American countries. Our findings overturn results obtained with traditional unit-root tests and provide a more realistic alternative to evaluate the external solvency of an economy.Current account, Nonlinearity

A Nonlinear Approach to Public Finance Sustainability in Latin America

The debt crisis in Latin America is associated with the large fiscal imbalances of the 1980s; therefore public finance sustainability occupies the center of stabilization efforts in these economies. The literature examining this question in emerging economies is surprisingly scant and this paper aims at filling this gap. We analyze sustainability for a sample of Latin American countries, employing unit root tests that incorporate nonlinear alternative hypotheses. These tests capture the thresholds or corridor regimes that international agreements or markets impose on emerging economies' public finances. We show that support for sustainability substantially improves when such nonlinearities are taken into account.

Toxicity of cadmium on hepatic and myocardial cells

Cadmium (Cd) is a heavy metal, a prevalent environmental containment, which can harm many organs af­ter environmental exposure and has been linked to many disorders, diseases and carcinogenesis in human. The aim of the present study was to investigate the ultrastructural alterations of mice myocardial and liver cells induced by exposure to Cd. Exposure of cells to Cd leads to significant transmutations of the cellular structures. The ultrastructural changes were investigated in all of the above mentioned cells after 4 weeks at a dose corresponding to human environmental exposure of Cd. In Cd induced group, ultrastructural alterations included formation of intracellular vacuoeles and significant disruption of the outer membrane of the mitochondria. Many transformations in cellular structures are in a casual relationship with the increased oxidative stress, aberrant gene expression and inhibition of cell apoptosis of the exposed cells. The evidence of the ultrastructural alterations in our observed Cd group indicates that the exposure plays a central role in the disturbance of organ’s homeostasis and damages of cellular structure