The purchasing power parity hypothesis is investigated within a highly economically integrated set of nations, namely the European Monetary System. We use the PhillipsHansen Fully Modified Ordinary Least Squares procedure, which for the first time allows for an unrestricted cointegration test of the PPP doctrine. We sequentially test for the weak and strong form of PPP.
Studies in Economics and Finance – Emerald Publishing
Published: Jan 1, 1996