Exchange Rate Volatility and Purchasing Power Parity: Does Euro Make Any Difference?
This paper provides a new test of the purchasing power parity (PPP) and its relevance for the Euro. Principal component analysis (PCA) is employed to construct a pooled measure of inflation for 12 Euro-currency countries. This measure is used to test the PPP for Euro against three major currencies,...
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| Format: | Article |
| Language: | English |
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Universiti Utara Malaysia
2010
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| Online Access: | https://repo.uum.edu.my/id/eprint/25062/1/IJBF%207%201%202010%2099%20118.pdf |
| _version_ | 1803628859319386112 |
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| author | Manzur, Meher Chan, Felix |
| author_facet | Manzur, Meher Chan, Felix |
| author_sort | Manzur, Meher |
| collection | UUM |
| description | This paper provides a new test of the purchasing power parity (PPP) and its relevance for the Euro. Principal component analysis (PCA) is employed to construct a pooled measure of inflation for 12 Euro-currency countries. This measure is used to test the PPP for Euro against three major currencies, namely, those of the Japan, UK and USA. The test results are then used to measure the speed of adjustment of the deviations from parity using rolling and recursive regressions procedures.Finally, the forecasting accuracy of the PPP-based Euro exchange rates is compared with those given by the random walk model, and the synthetic Euro series provided by the European Central Bank. In general, the results are supportive of PPP. |
| first_indexed | 2024-07-04T06:28:39Z |
| format | Article |
| id | uum-25062 |
| institution | Universiti Utara Malaysia |
| language | English |
| last_indexed | 2024-07-04T06:28:39Z |
| publishDate | 2010 |
| publisher | Universiti Utara Malaysia |
| record_format | dspace |
| spelling | uum-250622018-10-25T02:31:56Z https://repo.uum.edu.my/id/eprint/25062/ Exchange Rate Volatility and Purchasing Power Parity: Does Euro Make Any Difference? Manzur, Meher Chan, Felix HG Finance This paper provides a new test of the purchasing power parity (PPP) and its relevance for the Euro. Principal component analysis (PCA) is employed to construct a pooled measure of inflation for 12 Euro-currency countries. This measure is used to test the PPP for Euro against three major currencies, namely, those of the Japan, UK and USA. The test results are then used to measure the speed of adjustment of the deviations from parity using rolling and recursive regressions procedures.Finally, the forecasting accuracy of the PPP-based Euro exchange rates is compared with those given by the random walk model, and the synthetic Euro series provided by the European Central Bank. In general, the results are supportive of PPP. Universiti Utara Malaysia 2010 Article PeerReviewed application/pdf en https://repo.uum.edu.my/id/eprint/25062/1/IJBF%207%201%202010%2099%20118.pdf Manzur, Meher and Chan, Felix (2010) Exchange Rate Volatility and Purchasing Power Parity: Does Euro Make Any Difference? The International Journal of Banking and Finance, 7 (1). pp. 99-118. ISSN 1617-722 http://ijbf.uum.edu.my/index.php/previous-issues/139-the-international-journal-of-banking-and-finance-ijbf-vol-7-no-1-feb-march-2010 |
| spellingShingle | HG Finance Manzur, Meher Chan, Felix Exchange Rate Volatility and Purchasing Power Parity: Does Euro Make Any Difference? |
| title | Exchange Rate Volatility and Purchasing Power Parity: Does Euro Make Any Difference? |
| title_full | Exchange Rate Volatility and Purchasing Power Parity: Does Euro Make Any Difference? |
| title_fullStr | Exchange Rate Volatility and Purchasing Power Parity: Does Euro Make Any Difference? |
| title_full_unstemmed | Exchange Rate Volatility and Purchasing Power Parity: Does Euro Make Any Difference? |
| title_short | Exchange Rate Volatility and Purchasing Power Parity: Does Euro Make Any Difference? |
| title_sort | exchange rate volatility and purchasing power parity does euro make any difference |
| topic | HG Finance |
| url | https://repo.uum.edu.my/id/eprint/25062/1/IJBF%207%201%202010%2099%20118.pdf |
| work_keys_str_mv | AT manzurmeher exchangeratevolatilityandpurchasingpowerparitydoeseuromakeanydifference AT chanfelix exchangeratevolatilityandpurchasingpowerparitydoeseuromakeanydifference |