Generalized purchasing power parity and the case of the European Union as a successful currency area

Abstract

This article uses multicountry purchasing power parity (PPP)

Is theGulfCooperationCouncil an Optimum Currency Area?

“…For instance, Rangkakulnuwat et al . (), Wilson and Choy (), and Choudhry () examine G‐PPP for East Asian countries, and Bernstein () and Sarno () examine the theory for the European Union.…”

Asymmetric cointegration relationship among Asian exchange rates

“…He found that no significant evidence of homogeneity in exchange-rate behavior is found between ERM countries. Bernstein (2000) tested the G-PPP real exchange-rate behavior across Euro areas and found that the null of non-cointegration cannot be rejected. Ogawa and Kawasaki (2003) and Choudhry (2005) used G-PPP theory to explain the non-mean reverting behavior of real exchange rates in East Asian countries using data during the preand post-crisis periods, respectively.…”

“…On the other hand, some researchers extended PPP theory and investigated the generalized purchasing power parity (G-PPP) model in which PPP is held if a linear combination of some real exchange-rate series has equilibrium in the long-term, even though each of the real exchange-rate series is non-stationary. Some researchers investigated whether the component series of real exchange rates exhibits stable linear combinations in the long-term Hurn 1994, 1997;Sarno 1997;Bernstein 2000;Ogawa and Kawasaki 2003;Choudhry 2005).…”

Optimum currency areas, structural changes and the endogeneity of the OCA criteria: evidence from six new EU member states

“…Sarno (1997) tests for cointegration of the real exchange rates of a number of EMS countries for the period before the introduction of the euro. Bernstein (2000) assesses cointegration of the real exchange rates of a group of European countries. Antonucci and Girardi (2006) use the real exchange rates of 11 EMU countries and examine the effects of structural changes on the behaviour of the real exchange rates.…”