Long-Run Purchasing Power Parity and the Dollar-Sterling Exchange Rate in the 1920's
December 1, 1990
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Summary
This paper replies to Ahking’s (1990) re-examination of Taylor and McMahon’s (1988) analysis of long-run purchasing power parity in the 1920s. We demonstrate that Ahking’s conclusions are only partially correct and reestablish our conclusion that, a form of long-run purchasing-power parity did in fact hold for dollar-sterling during this period. The new results are also employed to gauge the degree of overvaluation of sterling relative to the imposed prewar parity of $4.86 upon its return to gold and for 12 months afterwards.
Subject: Econometric analysis, Exchange rates, Foreign exchange, Prices, Purchasing power parity, Wholesale price indexes
Keywords: Exchange rates, null hypothesis, Purchasing power parity, test statistics, time series, trend term, U.K. price series, U.K. wholesale price index, unit root test statistic, Wholesale price indexes, WP
Pages:
25
Volume:
1990
DOI:
Issue:
118
Series:
Working Paper No. 1990/118
Stock No:
WPIEA1181990
ISBN:
9781451940565
ISSN:
1018-5941
