Abstract:This study applies the threshold unit root test proposed by Caner and Hansen (2001) to test the validity of long-run purchasing power parity (PPP) in a sample of 15 Latin American countries. These countries share characteristics as high inflation, nominal shocks and trade openness which might have led to quicker adjustment in relative prices and contributed for PPP to hold. The empirical results indicate that most of the real exchange rates in these 15 Latin American countries adjustments are in equilibrium wi… Show more
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