Unit Roots, Level Shifts and Purchasing Power Parity

18 Pages Posted: 3 Aug 1998

See all articles by Antonio Montañes

Antonio Montañes

University of Zaragoza - Faculty of Business and Economics

Date Written: August 27, 1997

Abstract

In this paper we analyse the unit root hypothesis when the variable being studied exhibits two changes in its mean. To that end, we design a new statistic which tests for the joint hypothesis that the autoregressive parameter is 1 and that the parameters associated with the structural breaks that appear under the alternative hypothesis are 0. The use of this statistic shows that the real exchange rate of the US dollar with the currencies that are closely linked to the German Mark are stationary around two changes in the mean for the 1974: 1-1995: 4 sample.

JEL Classification: C22, F31

Suggested Citation

Montañes Bernal, Antonio, Unit Roots, Level Shifts and Purchasing Power Parity (August 27, 1997). Available at SSRN: https://ssrn.com/abstract=92508 or http://dx.doi.org/10.2139/ssrn.92508

Antonio Montañes Bernal (Contact Author)

University of Zaragoza - Faculty of Business and Economics ( email )

Gran Via, 2
50005 Zaragoza, Zaragoza 50005
Spain
34 976 76 22 21 (Phone)
34 976 76 19 96 (Fax)

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