Are Real Exchange Rates of Papua New Guinea Mean-Reverting? Evidence from Panel Unit Root Tests

Full text for this resource is not available from the Research Repository.

Wickremasinghe, Guneratne B (2009) Are Real Exchange Rates of Papua New Guinea Mean-Reverting? Evidence from Panel Unit Root Tests. Applied Economic Letters, 16 (2). pp. 157-161. ISSN 1350-4851

Abstract

This article examines mean-reversion of real exchange rates of Papua New Guinea (PNG), which is the crucial condition for purchasing power parity (PPP) to hold. Taking a departure from the most previous studies, we used six panel unit root tests to investigate the empirical validity of the PPP hypothesis to PNG. Both the preliminary analysis performed by examining time series plots of real exchange rates and the results of the panel unit root tests indicate that the PPP does not hold for PNG. These results may be attributed to frictions, such as transportations costs, prevailing in international trade that lead PPP to follow a nonlinear stochastic process. This issue will be investigated in future research.

Dimensions Badge

Altmetric Badge

Item type Article
URI https://vuir.vu.edu.au/id/eprint/4688
DOI https://doi.org/10.1080/13504850601018296
Official URL http://www.tandfonline.com/doi/abs/10.1080/1350485...
Subjects Historical > Faculty/School/Research Centre/Department > School of Accounting
Historical > FOR Classification > 1402 Applied Economics
Historical > FOR Classification > 1502 Banking, Finance and Investment
Historical > SEO Classification > 9001 Financial Services
Keywords ResPubID18015, mean-reversion of real exchange rates, Papua New Guinea, purchasing power parity (PPP), empirical validity of PPP hypothesis, nonlinear stochastic process
Citations in Scopus 3 - View on Scopus
Download/View statistics View download statistics for this item

Search Google Scholar

Repository staff login