Izvorni znanstveni članak
https://doi.org/10.1080/1331677X.2019.1637763
Does the purchasing power parity fit for China?
Kai-Hua Wang
; Department of Finance, Qingdao University, Shandong Sheng, China
Chi-Wei Su
; Department of Finance, Qingdao University, Shandong Sheng, China
Ran Tao
; Technological Center, Shandong Entry-Exit Inspection and Quarantine Bureau, Shandong Sheng, China
De-Ping Xiong
; School of Finance, Yunnan University of Finance and Economics, Yunnan Sheng, China
Sažetak
This paper aims to assess whether the purchasing power parity (PPP) holds by examining the dynamic link between nominal exchange rate (NER) and relative consumer price (RCP) in China. With economic transitions and structural changes existing, we discover that by using full sample data the PPP does not hold. Consequently, we apply the rolling window causality method in order to reconsider the dynamic causal link, and as a result we observe NER having both positive and negative impacts on RCP in some sub-periods. However, RCP has no effect on the NER, meaning that the PPP does not hold. Trade cost, restrictions and imperfect competition are considered in explaining the deviations in some sub-sample periods. Therefore, this empirical result has important implications for stakeholders to distinguish factors that bring about the PPP deviations and further offers policy suggestions for the Chinese monetary authority
Ključne riječi
Consumer Price Index; exchange rate; rolling window; bootstrap; time-varying causality
Hrčak ID:
228888
URI
Datum izdavanja:
22.1.2019.
Posjeta: 1.308 *