We examine the evidence for Purchasing Power Parity using post Bretton Woods exchange rate data for twenty industrialized countries. The two tests we use are covariate tests for stationarity where the null hypothesis of stationarity is tested against the unit root alternative. These tests are generalizations of existing univariate stationarity tests and improve the power of univariate tests by utilizing information contained in related stationary covariates. We conclude that PPP holds for 17 out of the 20 countries tested. The unique course offerings create an interdisciplinary, interactive learning environment that facilitates the exchange of ideas among U.S. and international participants in Monterey, California, and locations worldwide. These programs are presented on a regularly scheduled basis at DRMI in Monterey and by specific arrangement at other locations in the United States and in other countries.The success of DRMI reflects the breadth and depth of the in-house technical expertise that DRMI can draw upon. The DRMI faculty, a community of scholars and practitioners, are experts in defense resources management and has published in major academic and technical journals. The faculty has extensive experience in providing technical assistance and educational programs worldwide over the past 40 years. Our educational strategy is one of collaboration, tailored to the specific environment of the participant.The Defense Resources Management Institute specializes in four broad educational areas:• Economic analysis of the public sector • Operations research of public sector decision problems • Public budgeting and fiscal management • Defense organizations and management methods For more information about our educational and technical assistance activities, please visit our website at http://www.nps.edu/drmi or email us at drmiadmin@nps.edu.
Testing for Stationarity Using Covariates: An Application to Purchasing Power ParityJomana Amara
Naval Postgraduate School
AbstractWe examine the evidence for Purchasing Power Parity using post Bretton Woods exchange rate data for twenty industrialized countries. The two tests we use are covariate tests for stationarity where the null hypothesis of stationarity is tested against the unit root alternative. These tests are generalizations of existing univariate stationarity tests and improve the power of univariate tests by utilizing information contained in related stationary covariates. We conclude that PPP holds for 17 out of the 20 countries tested.