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Original Articles

Purchasing power parity revisited: null of cointegration approach

Pages 573-575 | Received 07 Apr 1997, Published online: 02 Nov 2006
 

Abstract

This paper undertakes a study of the Purchasing Power Parity doctrine as a long run equilibrium condition among a highly economically integrated set of nations, namely members of the European Monetary System (EMS). Here we examine the bivariate cointegration properties of the intra-EMS spot exchange rate series and their price ratios, using the modern null of cointegration approach. Our results support the parity hypothesis within the union.

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