Authors: Alves D. C. O.; Cati R.C.; Fava V.L.

Source: Applied Economics, Volume 33, Number 9, 20 July 2001 , pp. 1175-1185(11)

Publisher: Routledge, part of the Taylor & Francis Group

Abstract:

The purpose of this paper is to test the validity of the purchasing power parity (PPP) doctrine in Brazil. Historical data for the period 1855-1996 are considered. The period 1855-1990 is also analysed in order to compare the results with those obtained by Zini and Cati (1993) using the conventional cointegration analysis. This article uses fractional cointegration analysis, a flexible methodology which allows for more subtle forms of mean reversion. The tests performed are those of Geweke and Porter-Hudak (1983), and of Hurvich and Ray (1995). The critical values for both tests are generated by simulation because they are non-standard. The empirical results do not support the absolute PPP hypothesis but the relative PPP holds in the long run.

Language: English

Document Type: Research article

Publication date: 2001-07-20

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