Nonlinear unit root tests of PPP using long-horizon data

The Kapetanios, Shin, and Snell (KSS, 2003) test for a nonlinear unit root is used to study purchasing power parity using Taylor's extensive data set, d to include recent exchange rate and price level data. The results i) indicate that PPP holds with respect to the US dollar for most countries and ii) are more supportive of PPP than those from standard linear unit root tests.

Purchasing power parity in Mexico: a historical note

Purchasing power parity has been the subject of many empirical studies. Much of this work has focused on recent history in developed countries. This paper reports results of tests for nonlinear, mean reversion of the real exchange rate for a less-developed country, Mexico, using a previously unexploited data set of monthly observations for 1930-1960. The test results provide weak support for PPP.purchasing power parity; nonlinear unit root

Testing for a nonlinear Fisher relationship

Empirical evidence regarding the Fisher effect is mixed. One reason may be a nonlinear adjustment process in the real interest rate. The nonlinear unit root test proposed by Sollis, Leybourne, and Newbold (Journal of Money, Credit, and Banking 34: 686-700, 2002) is used to test for stationarity of the U.S. real interest rate over the 1934:01-2011:02 period and selected subperiods. The unit root null in the real rate of interest can be rejected over the full sample, evidence of a Fisher effect. Weaker evidence of a Fisher relation is found in the subsample for 1934:01-1959:12 for which the unit root null can be rejected for one measure of the real interest rate. However, there is no indication of a Fisher effect for subperiods starting in 1960 or later. A conjecture is that temporal aggregation of the interest rate data may explain the different results, but the findings are also consistent with other explanations.Fisher effect, nonlinear unit root, U.S. real interest rate

Long run effects of money on real consumption and investment in the U.S.

This paper tests for long run neutrality (LRN) of money with respect to real expenditures in the U.S. over the 1947-2004 period. Real consumption and investment expenditures, as well as their broadly defined components, are examined. We also test for the effects of money on long run reallocations of GDP among durables, nondurables, and services. The time series characteristics of each variable are rigorously investigated. This is followed by application of the LRN test, introduced by Fisher and Seater (1993), to each real expenditures series. Although rejections of LRN occur in a number of studies, our results support long run neutrality of money with respect to real expenditures regardless of the level of data aggregation.Money neutrality; consumption; investment

The relation between U.S. money growth and inflation: evidence from a band-pass filter

Christiano and Fitzgerald (2003) found a significant, positive correlation between M2 money growth and CPI inflation in all examined frequency bands for the U.S. prior to 1961. However, for post-1960 data, they found a positive correlation only in the frequency band corresponding to cycles of 20-40 years. Using their filter, we verify this result and extend the pre-1961 sample to include the monetary base and inflation calculated from the GDP deflator. In addition, we extend their post-1960 analysis to include growth in the monetary base, M1, and M3. A strongly positive correlation between post-1960 money growth and inflation exits only for the broad money aggregates and within the 20-40 year frequency band.band-pass filter

Long Run Neutrality and Superneutrality of Money: Aggregate and Sectoral Tests for Nicaragua

The Fisher-Seater (1993) methodology is applied to Nicaraguan data to test for long run neutrality and superneutrality of money. Real GDP and real output in six broadly defined sectors are I(1), while the money supply is I(2). These orders of integration imply that money is neutral with respect to both aggregate and sectoral output. However, superneutrality is rejected for real GDP as well as for all six sectors. Results of the superneutrality tests suggest that inflation driven by money growth imposed real costs on the private sector while the government sectorMonetary neutrality, superneutrality, Nicaragua

Trait anxiety : a psychometric shadow

The purpose of the present study is to examine the independent relationships which trait and state anxiety have to measures of fear in rat-phobic female college students during imagined and live encounters with a member of their feared stimulusclass.Includes bibliographical references

Price Indexes are a Problem for Testing PPP

This note illustrates a problem in purchasing power parity studies that test for stationarity of the real exchange rate. If the real rate series is constructed using price indexes then the real exchange rate may not be stationary even if the law of one price always holds for every good in the indexes

Cointegration tests of purchasing power parity

In recent work Im, Lee, and Enders (2006) use stationary instrumental variables to test for cointegrating relationships. The advantage of their approach is that the t-statistics are asymptotically standard normal and the familiar critical values of the normal distribution may be used to assess significance. Thus, the test avoids the nuisance parameter problem in single equation regressions for cointegration. Using an updated version of the data set developed by Taylor (2002), the ILE test is compared to three single equation alternatives in testing for purchasing power parity: An error correction model, autoregressive distributed lag model, and the Engle-Granger two step procedure. The regressions with instruments provide evidence supportive of PPP for some countries but the empirical results differ across tests and the choice of instrument can affect the results

Purchasing power parity in Mexico: a historical note

Purchasing power parity has been the subject of many empirical studies. Much of this work has focused on recent history in developed countries. This paper reports results of tests for nonlinear, mean reversion of the real exchange rate for a less-developed country, Mexico, using a previously unexploited data set of monthly observations for 1930-1960. The test results provide weak support for PPP