ABSTRACT
The aim of this paper is to test the purchasing power parity theory for the exchange rates between the peseta and both the French franc and the pound sterling for the period 1868–1914. The stationarity of the real exchange rate is tested using linear and non-linear unit root tests and wholesale and consumer price series. The results show that possible short-term deviations in the real exchange rate series are corrected in the long term, so the purchasing power parity theory holds.
Acknowledgments
The authors gratefully acknowledge the financial support from the Spanish Ministerio de Ciencia y Tecnología, Agencia Española de Investigación (AEI) and European Regional Development Fund (ERDF, EU) under grants ECO2017-83255-C3-1-P (AEI/ERDF, EU), ECO2017-83255-C3-3-P (AEI/ERDF, EU) and ECO2016-81901-REDT (M. D. Gadea) and Gobierno de Aragon, SEIM (G. Fabro and M.D. Gadea).
Disclosure statement
No potential conflict of interest was reported by the authors.
Notes
2 A complete panorama of the fundaments of the PPA theory can be found in Officer (Citation1982).
7 Some authors, such as Yoon (Citation2008), find that real exchange rates show a more stationary behaviour in periods dominated by an institutional context of fixed exchange rates than during periods of flexible exchange rates.
9 They extend the proposal of Enders and Lee (Citation2012a, Citationb). The authors appreciate the help provided by Tolga Omay in the implementation of these tests.
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Funding
This work was supported by the (MICINU, AEI/ERDF, EU) [ECO2017-83255-C3-1-P and ECO2017-83255-C3-3-P].
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