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Year 2015, Volume: 4 Issue: 1, 0 - 0, 29.03.2015

Abstract

References

  • • Aizenman, Joshua, (1984), “Modeling Deviations from PPP”, International Economic Review, 23:261–80.
  • • Alba, J.D. & Park, D. (2003), “Purchasing power parity in developing countries: multi-period evidence under the current float”, World Development, 31(12):2049- 2060.
  • • Breuer, Janice Boucher (1994) "An Assessment of the Evidence on Purchasing Power Parity". In Estimating Equilibrium Exchange Rates. John Williamson, ed. 245-277, Washington, D.C.: Institute for International Economics.
  • • Craig, Ben (2005),” The Growing Significance of Purchasing Power Parity”, Federal Reserve Bank of Cleveland, ISSN 0428-1276
  • • Cassel, Gustav, (1918), ”Abnormal deviations in international exchanges”, The Economic Journal, 28:413-415
  • • Chinn, Menzie D. (2006), “A Primer on Real Effective Exchange Rates: Determinants, Overvaluation, Trade Flows and Competitive Devaluation”, Open Economies Review 17: 115–143
  • • Dickey, D. A., & W. A. Fuller. (1981). “Likelihood ratio statistics for autoregressive time series with a unit root”, Econometrica, 49 (4): 1057–72.
  • • Dornbusch, Rudiger, (1985),"Purchasing Power Parity", NBER Working Papers, 1591
  • • Dornbusch, Rudiger (1992) "Purchasing Power Parity" In The New Palgrave Dictionary of Money and Finance. Peter Newman, Murray Milgate and John Eatwell, eds. Vol. 3, 236-244, New York: The Stockton Press.
  • • Drine, Imed & Rault , Christophe, (2003)"A re-examination of the Purchasing Power Parity using non-stationary dynamic panel methods: a comparative approach for developing and developed countries,"William Davidson Institute Working Papers Series 2003-570, William Davidson Institute at the University of Michigan.
  • • Enders, W. (2004), Applied Econometric Time Series, 2nd ed., John Wiley & Sons, Inc.
  • • Gil-Alana, Luis Alberiko and Jiang, Liang (2011),” The Purchasing Power Parity Hypothesis In The Us–China Relationship: Fractional Integration, Time Variation And Data Frequency”, International Journal of Finance & Economics, DOI: 10.1002/ijfe.461

PURCHASING POWER PARITY (PPP) BETWEEN CHINA AND THE U.S.: AN EMPIRICAL COMPARATIVE CASE STUDY

Year 2015, Volume: 4 Issue: 1, 0 - 0, 29.03.2015

Abstract

 This study investigates the validity of Purchasing Power Parity (PPP) in explaining China's real exchange rate with regard to the US over the period 2000-2012. It applies traditional unit root tests, and the procedure developed by Zivot and Andrews and Lee-Strazicich to endogenously determine potential structural breaks. The results indicate that while the PPP hypothesis holds under China's former fixed (“pegged”) exchange regime, that, in the long run, it no longer holds under China's current managed floating exchange rate regime. In general, the findings lend support to the position that the exchange rate regime affects the validity of PPP theory for explaining exchange rates between countries.

References

  • • Aizenman, Joshua, (1984), “Modeling Deviations from PPP”, International Economic Review, 23:261–80.
  • • Alba, J.D. & Park, D. (2003), “Purchasing power parity in developing countries: multi-period evidence under the current float”, World Development, 31(12):2049- 2060.
  • • Breuer, Janice Boucher (1994) "An Assessment of the Evidence on Purchasing Power Parity". In Estimating Equilibrium Exchange Rates. John Williamson, ed. 245-277, Washington, D.C.: Institute for International Economics.
  • • Craig, Ben (2005),” The Growing Significance of Purchasing Power Parity”, Federal Reserve Bank of Cleveland, ISSN 0428-1276
  • • Cassel, Gustav, (1918), ”Abnormal deviations in international exchanges”, The Economic Journal, 28:413-415
  • • Chinn, Menzie D. (2006), “A Primer on Real Effective Exchange Rates: Determinants, Overvaluation, Trade Flows and Competitive Devaluation”, Open Economies Review 17: 115–143
  • • Dickey, D. A., & W. A. Fuller. (1981). “Likelihood ratio statistics for autoregressive time series with a unit root”, Econometrica, 49 (4): 1057–72.
  • • Dornbusch, Rudiger, (1985),"Purchasing Power Parity", NBER Working Papers, 1591
  • • Dornbusch, Rudiger (1992) "Purchasing Power Parity" In The New Palgrave Dictionary of Money and Finance. Peter Newman, Murray Milgate and John Eatwell, eds. Vol. 3, 236-244, New York: The Stockton Press.
  • • Drine, Imed & Rault , Christophe, (2003)"A re-examination of the Purchasing Power Parity using non-stationary dynamic panel methods: a comparative approach for developing and developed countries,"William Davidson Institute Working Papers Series 2003-570, William Davidson Institute at the University of Michigan.
  • • Enders, W. (2004), Applied Econometric Time Series, 2nd ed., John Wiley & Sons, Inc.
  • • Gil-Alana, Luis Alberiko and Jiang, Liang (2011),” The Purchasing Power Parity Hypothesis In The Us–China Relationship: Fractional Integration, Time Variation And Data Frequency”, International Journal of Finance & Economics, DOI: 10.1002/ijfe.461
There are 12 citations in total.

Details

Journal Section Articles
Authors

Murat Gidis This is me

Fatih Mangir

Hasan Murat Ertugrul This is me

Bansi Sawhney This is me

Publication Date March 29, 2015
Published in Issue Year 2015 Volume: 4 Issue: 1

Cite

APA Gidis, M., Mangir, F., Ertugrul, H. M., Sawhney, B. (2015). PURCHASING POWER PARITY (PPP) BETWEEN CHINA AND THE U.S.: AN EMPIRICAL COMPARATIVE CASE STUDY. Journal of Business Economics and Finance, 4(1). https://doi.org/10.17261/Pressacademia.201519949

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