Long-Run Purchasing Power Parity with Asymmetric Adjustment: Evidence from Mainland China and Taiwan

This study applies threshold cointegration test advanced by Enders and Siklos (2001) to investigate the properties of asymmetric adjustment in long-run purchasing power parity (PPP) for both Mainland China and Taiwan during the January 1986 to October 2009 period. Although there is evidence of long-run PPP for both Mainland China and Taiwan, the adjustment mechanism is asymmetric. These results have important policy implications for both Mainland China and Taiwan under study.threshold cointegration test; Purchasing Power Parity; asymmetric adjustment; Mainland China; Taiwan

An Empirical Note on Testing the Cointegration Relationship Between the Real Estate and Stock Markets in Taiwan

This note studies the long-run relationship between real estate and stock markets in the Taiwan context over the 1986Q3 to 2006Q4 period, using standard cointegration test of Johansen and Juselius (1990) and that of Engle-Granger (1987) as well as the fractional cointegration test of Geweke and Porter-Hudak (1983). The results from both types of cointegration tests strongly indicate that these two markets are not cointegrated with each other. With respect to risk diversification, it is obvious that investors and financial institutions should have included both assets in the same portfolio during that period.