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Journal of Economic Integration 1998 June;13(2) :232-254.
DOI: https://doi.org/10.11130/jei.1998.13.2.232
Testing the Purchasing Power Parity Theory: A Case of the Taiwanese Dollar Exchange Rate
Hiroki Tsurumi and 
Chyong L. Chen 
Rutgers University
Feng Chia University
Copyright ©1998 Journal of Economic Integration
ABSTRACT
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)
 
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.
2. Central Bank of China, Annual Reports, Taipei, Taiwan, Various Issues.
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