Record Details

The Purchasing Power Parity Hypothesis: Is there evidence from the Bilateral Real Exchange Rate between Mexico and the United States of America?

Ghana Journal of Development Studies

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Field Value
 
Title The Purchasing Power Parity Hypothesis: Is there evidence from the Bilateral Real Exchange Rate between Mexico and the United States of America?
 
Creator Boamah, NA
 
Subject Exchange Rate Variability, Inflationary Differentials, Purchasing Power Parity, Unit Root, Mean Reversion
 
Description The hypothesis that national price levels should be equal when expressed in a common currency has been widely studied. However, evidence from empirical literature is mixed on the validity of purchasing power parity (PPP) in the long run. This paper examined the long run validity of PPP using the bilateral real exchange rate between Mexico and the United States of America (USA). It tests for the relative version of the PPP hypothesis using univariate unit root technique. It discusses evidence in favor of PPP for the bilateral real exchange rate between Mexico and USA. It also finds a half-life of 1-2 years for the real exchange rate adjustment to its mean. Consequently, it suggests that there is mean reversion in the bilateral real exchange rate between Mexico and USA.Keywords: Exchange Rate Variability, Inflationary Differentials, Purchasing Power Parity, Unit Root, Mean Reversion.
 
Publisher Faculty of Integrated Development Studies, University for Development Studies
 
Contributor —
 
Date 2012-03-12
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
Peer-reviewed Article
 
Format application/pdf
 
Identifier http://www.ajol.info/index.php/gjds/article/view/74659
10.4314/gjds.v8i2.4
 
Source Ghana Journal of Development Studies; Vol 8, No 2 (2011); 49-63
0855-6768
 
Language eng
 
Relation http://www.ajol.info/index.php/gjds/article/view/74659/65268
 
Rights Faculty of Integrated Development Studies, University for Development Studies, Ghana