Publications

Basher, S. A.; Carrion-i-Silvestre, J. L.
  • Year: 2013
    Deconstructing shocks and persistence in OECD real exchange rates. BE Journal of Macroeconomics, 13 (1), 187-212.
    DOI: 10.1515/bejm-2012-0060
    Abstract: We study the Purchasing Power Parity (PPP) hypothesis and the PPP puzzle for a sample of seventeen OECD economies when real exchange rates (RERs) are subject to multiple structural breaks. Applying recent panel econometric methods, we first show that RERs are found to be I(1) non-stationary processes when the analysis neglects structural breaks, while they are characterized as I(0) stationary stochastic processes when structural breaks are accommodated. This indicates that ignoring structural breaks can lead to model misspecification, which can bias (upward) shocks’ persistence measures. After controlling for structural breaks, our half-life point estimates appear below one year for both idiosyncratic and common measures of persistence of deviation from the changing mean.
    http://www.syedbasher.org/published/BEJM.pdf