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The Canadian Dollar and Purchasing Power Parity during the Recent Float
Author(s) -
Kouretas Georgios P.
Publication year - 1997
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/1467-9396.00070
Subject(s) - purchasing power parity , cointegration , economics , econometrics , us dollar , liberian dollar , relative purchasing power parity , float (project management) , null hypothesis , sample (material) , exchange rate , monetary economics , management , finance , chemistry , chromatography
This paper re‐examines the purchasing power parity (PPP) concept for five bilateral Canadian dollar exchange rates. The Johansen cointegration technique is employed. Evidence is found in favor of PPP when wholesale prices are used but not when consumer prices are utilized; whereas, in all but one case, it is not possible to reject the symmetry and proportionality hypotheses. Furthermore, it is shown that the dimension of the cointegration space may exhibit sample dependency, but the estimated coefficients are stable in recursive estimations. Finally, by implementing the multivariate KPSS test for the null hypothesis of cointegration, Johansen’s results are overturned.