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Purchasing power parity and structural instability in the US/UK exchange rate


Reference:

Karoglou, M. and Morley, B., 2012. Purchasing power parity and structural instability in the US/UK exchange rate. Journal of International Financial Markets, Institutions and Money, 22 (4), pp. 958-972.

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    Official URL:

    http://dx.doi.org/10.1016/j.intfin.2012.05.001

    Abstract

    The aim of this study is to determine if nonlinearities have affected purchasing power parity (PPP) since 1885. Also using recent advances in the econometrics of structural change we segment the sample space according to the identified breaks and look at whether the PPP condition holds in each sub-sample and whether this involves linear or non-linear adjustment. Our results suggest that during some sub-periods, PPP holds, although whether it holds or not and whether the adjustment is linear or non-linear, depends primarily on the type of exchange rate regime in operation at any point in time.

    Details

    Item Type Articles
    CreatorsKaroglou, M.and Morley, B.
    DOI10.1016/j.intfin.2012.05.001
    DepartmentsFaculty of Humanities & Social Sciences > Economics
    Publisher StatementMorley_EconLett_2012.pdf: NOTICE: this is the author’s version of a work that was accepted for publication in Journal of International Financial Markets, Institutions and Money. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of International Financial Markets, Institutions and Money, vol 22, issue 4, 2012, DOI 10.1016/j.intfin.2012.05.001
    RefereedYes
    StatusPublished
    ID Code31031

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