On the application of the rank tests for nonlinear cointegration to PPP: The case of Papua New Guinea
Much interest has been paid recently to the nonlinear cointegrating relations existing among economic variables. Various testing procedures are already available to test for the existence of nonlinear cointegration. For example, Breitung (2001) proposes rank tests and his testing procedure has been...
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| Format: | Article |
| Language: | English |
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North-Holland
2012
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| Online Access: | http://ir.unimas.my/id/eprint/18003/ http://ir.unimas.my/id/eprint/18003/1/S0264999311002550 |
| _version_ | 1848838414230618112 |
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| author | Liew, Venus Khim-Sen Ling, Tai-Hu Chia, Ricky Chee-Jiun Yoon, Gawon |
| author_facet | Liew, Venus Khim-Sen Ling, Tai-Hu Chia, Ricky Chee-Jiun Yoon, Gawon |
| author_sort | Liew, Venus Khim-Sen |
| building | UNIMAS Institutional Repository |
| collection | Online Access |
| description | Much interest has been paid recently to the nonlinear cointegrating relations existing among economic variables. Various testing procedures are already available to test for the existence of nonlinear cointegration. For example, Breitung (2001) proposes rank tests and his testing procedure has been broadly applied. In this study, we warn against a blind application of the rank cointegration tests, particularly to economic variables that evidence certain behavior. As an illustration, we employ the nominal exchange rates and relative prices of Papua New Guinea against her major trading partners with the objective of testing the validity of purchasing power parity for the country. Our simulation results also confirm our warnings. Additionally, we provide some simple solutions to the problem we encounter herein. |
| first_indexed | 2025-11-15T06:55:10Z |
| format | Article |
| id | unimas-18003 |
| institution | Universiti Malaysia Sarawak |
| institution_category | Local University |
| language | English |
| last_indexed | 2025-11-15T06:55:10Z |
| publishDate | 2012 |
| publisher | North-Holland |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | unimas-180032017-10-06T07:58:08Z http://ir.unimas.my/id/eprint/18003/ On the application of the rank tests for nonlinear cointegration to PPP: The case of Papua New Guinea Liew, Venus Khim-Sen Ling, Tai-Hu Chia, Ricky Chee-Jiun Yoon, Gawon H Social Sciences (General) Much interest has been paid recently to the nonlinear cointegrating relations existing among economic variables. Various testing procedures are already available to test for the existence of nonlinear cointegration. For example, Breitung (2001) proposes rank tests and his testing procedure has been broadly applied. In this study, we warn against a blind application of the rank cointegration tests, particularly to economic variables that evidence certain behavior. As an illustration, we employ the nominal exchange rates and relative prices of Papua New Guinea against her major trading partners with the objective of testing the validity of purchasing power parity for the country. Our simulation results also confirm our warnings. Additionally, we provide some simple solutions to the problem we encounter herein. North-Holland 2012 Article PeerReviewed text en http://ir.unimas.my/id/eprint/18003/1/S0264999311002550 Liew, Venus Khim-Sen and Ling, Tai-Hu and Chia, Ricky Chee-Jiun and Yoon, Gawon (2012) On the application of the rank tests for nonlinear cointegration to PPP: The case of Papua New Guinea. Economic Modelling, 29 (2). pp. 326-332. ISSN 0264-9993 https://ir.unimas.my/18003/1/S0264999311002550 doi : 10.1016/j.econmod.2011.10.017 |
| spellingShingle | H Social Sciences (General) Liew, Venus Khim-Sen Ling, Tai-Hu Chia, Ricky Chee-Jiun Yoon, Gawon On the application of the rank tests for nonlinear cointegration to PPP: The case of Papua New Guinea |
| title | On the application of the rank tests for nonlinear cointegration to PPP: The case of Papua New Guinea |
| title_full | On the application of the rank tests for nonlinear cointegration to PPP: The case of Papua New Guinea |
| title_fullStr | On the application of the rank tests for nonlinear cointegration to PPP: The case of Papua New Guinea |
| title_full_unstemmed | On the application of the rank tests for nonlinear cointegration to PPP: The case of Papua New Guinea |
| title_short | On the application of the rank tests for nonlinear cointegration to PPP: The case of Papua New Guinea |
| title_sort | on the application of the rank tests for nonlinear cointegration to ppp: the case of papua new guinea |
| topic | H Social Sciences (General) |
| url | http://ir.unimas.my/id/eprint/18003/ http://ir.unimas.my/id/eprint/18003/ http://ir.unimas.my/id/eprint/18003/ http://ir.unimas.my/id/eprint/18003/1/S0264999311002550 |