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An empirical examination of purchasing power parity: Argentina 1810–2016
Author(s) -
Jacobo Alejandro D.,
SosvillaRivero Simón
Publication year - 2021
Publication title -
international journal of finance and economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.505
H-Index - 39
eISSN - 1099-1158
pISSN - 1076-9307
DOI - 10.1002/ijfe.1893
Subject(s) - purchasing power parity , cointegration , economics , econometrics , exchange rate , error correction model , relative purchasing power parity , structural break , short run , empirical evidence , macroeconomics , philosophy , epistemology
This paper examines the purchasing power parity behaviour for Argentina during the 1810–2016 period. To that end, we use cointegration analysis and error correction models allowing for structural breaks. We find a long‐run relationship between the AR$/USD exchange rate and the price differential between Argentina and the USA. In particular, we offer empirical evidence in favour of a cointegrating equation with two structural breaks. We also find evidence that the data could identify an appropriate error correction model for the short‐run dynamics, hence providing further support for the cointegrating equation as a long‐run relationship.