ARGENTINEAN REAL EXCHANGE RATE 1900-2006: TESTING PURCHASING POWER PARITY THEORY

This paper tests the Purchasing Power Parity Theory of Exchange Rates dealing with Argentinean data for the period 1900-2006. This is equivalent to testing if the Real Exchange Rate is a stationary variable or if its components (the nominal exchange rate and the relative prices) are cointegrated. Si...

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Autor principal:	Dal Bianco,Marcos José
Lenguaje:	English
Publicado:	Universidad de Chile. Departamento de Economía 2008
Materias:	Purchasing power parity real exchange rate stationarity unit root tests cointegration structural breaks
Acceso en línea:	http://www.scielo.cl/scielo.php?script=sci_arttext&pid=S0718-52862008000100003
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spelling	oai:scielo:S0718-528620080001000032009-01-05ARGENTINEAN REAL EXCHANGE RATE 1900-2006: TESTING PURCHASING POWER PARITY THEORYDal Bianco,Marcos José Purchasing power parity real exchange rate stationarity unit root tests cointegration structural breaks This paper tests the Purchasing Power Parity Theory of Exchange Rates dealing with Argentinean data for the period 1900-2006. This is equivalent to testing if the Real Exchange Rate is a stationary variable or if its components (the nominal exchange rate and the relative prices) are cointegrated. Since most works study developed countries or developing countries but with short span data, this paper aims to fill a gap in the wide PPP literature by studding a developing country with a long-run approach. This country is particularly interesting since during 20th century "Argentine economic performance tells a story of decline unparalleled in modern times" (Taylor 1992). The downfall of this once developed country has probably affected the behavior of its RER and the validity of PPP To check this, we use a wide set of econometric techniques and found that the PPP theory is not verified in Argentina, since its RER appears as a non-stationary variable, and there is no evidence of cointegration between the nominal exchange rate and the relative prices. In particular, the Argentinean RER appears to be trend-stationary under structural breaks with a continuous real depreciation of the Argentinean currency, especially in the first half of XX century, which is consistent with theories that relate the secular impoverishment of a country with the depreciation of its RER, as the Balassa-Samuelson effect.info:eu-repo/semantics/openAccessUniversidad de Chile. Departamento de EconomíaEstudios de economía v.35 n.1 20082008-06-01text/htmlhttp://www.scielo.cl/scielo.php?script=sci_arttext&pid=S0718-52862008000100003en10.4067/S0718-52862008000100003
institution	Scielo Chile
collection	Scielo Chile
language	English
topic	Purchasing power parity real exchange rate stationarity unit root tests cointegration structural breaks
spellingShingle	Purchasing power parity real exchange rate stationarity unit root tests cointegration structural breaks Dal Bianco,Marcos José ARGENTINEAN REAL EXCHANGE RATE 1900-2006: TESTING PURCHASING POWER PARITY THEORY
description	This paper tests the Purchasing Power Parity Theory of Exchange Rates dealing with Argentinean data for the period 1900-2006. This is equivalent to testing if the Real Exchange Rate is a stationary variable or if its components (the nominal exchange rate and the relative prices) are cointegrated. Since most works study developed countries or developing countries but with short span data, this paper aims to fill a gap in the wide PPP literature by studding a developing country with a long-run approach. This country is particularly interesting since during 20th century "Argentine economic performance tells a story of decline unparalleled in modern times" (Taylor 1992). The downfall of this once developed country has probably affected the behavior of its RER and the validity of PPP To check this, we use a wide set of econometric techniques and found that the PPP theory is not verified in Argentina, since its RER appears as a non-stationary variable, and there is no evidence of cointegration between the nominal exchange rate and the relative prices. In particular, the Argentinean RER appears to be trend-stationary under structural breaks with a continuous real depreciation of the Argentinean currency, especially in the first half of XX century, which is consistent with theories that relate the secular impoverishment of a country with the depreciation of its RER, as the Balassa-Samuelson effect.
author	Dal Bianco,Marcos José
author_facet	Dal Bianco,Marcos José
author_sort	Dal Bianco,Marcos José
title	ARGENTINEAN REAL EXCHANGE RATE 1900-2006: TESTING PURCHASING POWER PARITY THEORY
title_short	ARGENTINEAN REAL EXCHANGE RATE 1900-2006: TESTING PURCHASING POWER PARITY THEORY
title_full	ARGENTINEAN REAL EXCHANGE RATE 1900-2006: TESTING PURCHASING POWER PARITY THEORY
title_fullStr	ARGENTINEAN REAL EXCHANGE RATE 1900-2006: TESTING PURCHASING POWER PARITY THEORY
title_full_unstemmed	ARGENTINEAN REAL EXCHANGE RATE 1900-2006: TESTING PURCHASING POWER PARITY THEORY
title_sort	argentinean real exchange rate 1900-2006: testing purchasing power parity theory
publisher	Universidad de Chile. Departamento de Economía
publishDate	2008
url	http://www.scielo.cl/scielo.php?script=sci_arttext&pid=S0718-52862008000100003
work_keys_str_mv	AT dalbiancomarcosjose argentineanrealexchangerate19002006testingpurchasingpowerparitytheory
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ARGENTINEAN REAL EXCHANGE RATE 1900-2006: TESTING PURCHASING POWER PARITY THEORY

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