Testing the Purchasing Power Parity Theory: A Case of the Taiwanese Dollar Exchange Rate |
Hiroki Tsurumi, Chyong L. Chen |
Rutgers University Feng Chia University |
Copyright ©1998 Journal of Economic Integration |
ABSTRACT |
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From July 1978 to April 1989 Taiwan adopted a snake system by allowing the foreign exchange rate to fluctuate within a narrow band of the centere d rate. Using monthly data on the Taiwan dollar/U.S. dollar exchange rate, we show that inference on the purchasing power parity hypothesis is sensitive to whether we incorporate double truncation and autore g ressive and moving average error terms into the regression model. (JEL Classification: C2, F4) |
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REFERENCE |
1. |
Tronzano, M. [1992], "Long-Run Purchasing Power Parity and Mean-Reversion in Real Exchange Rates: A Further Comment," Economia Interna zionale 45(1); pp. 77-100. |
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2. |
Central Bank of China, Annual Reports, Taipei, Taiwan, Various Issues. |
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