Long Run Analyses of Real Exchange Rates

Empirical research into the long-run behavior of real exchange rates has employed econometric analyses of nonstationary time series and is aimed at testing the hypothesis that the real exchange rate has a unit root. This research can potentially provide evidence to distinguish between the Casselian and the Balassa-Samuelson views of the world. Univariate Tests of PPP Over the Float To test whether PPP holds in the long run, you can use the augmented Dickey-Fuller test (chapter 2.4) to test the...