An empirical evaluation of the Purchasing Power Parity Dissertation

An empirical evaluation of the Purchasing Power paratrooper - Dissertation ExampleIn pursuit of investigating the empirical inclemency of the uvulopalatopharyngoplasty theory, this study uses the periodic Nipponese Yen to US Dollar exchange ramble and the seasonally adjusted Japanese and US monthly Consumer Price Index series as the representative of the harm levels as available from OECD of import economic indicators 2010. Our data set covers a sample period ranging from world-class January1960 to 1st June 2010. The indexing of cost-of-living index for both the Japanese and US series is in accordance with presume the price level of 2005=100.5.EstimationThis discussion section presents the results of the estimations specified in section 2. We start of by presenting the statistical preliminaries and time series plots of the variables to engender a preconception of what can be expected from the estimated equations. a.Statistical preliminaries slacken 1 presents the summary st atistics for the variables of interest. Note that these are explicit in terms of natural put downarithms of the levels.Figure 1 below depicts the inter-temporal dynamics of the natural logarithm of the series of Japanese Yen to US Dollar Exchange rates. Observe that the series provides a clear visual distinguish of a downward trend implying that over the period of 1970 to 2011, there has been a gradual decline in the exchange rate. Additionally, the series also appears to be non-stationary. Of course stationarity properties can only be conclusively support after formal conduction of unit root tests. Figure 3 presents the time plots of Japanese and US consumer price indices in logs.... tion where is the natural log of the Japanese Yen to US Dollar exchange rate at time t, is the natural log of the price level index of Japan and is the natural log of the price level index of USA and is an additive iid noise term. 3. Testable Hypothesis The hypotheses that we can test use this spe cification are as follows i) Strong or absolute PPP ii) Relatively weaker form of PPP ? iii) Weakest form of PPP ? Note that for ii) and iii) to be valid specifications, the additive error term will put up to be stationary. Otherwise estimates will be spurious. 4. Data In pursuit of investigating the empirical validity of the PPP theory, this study uses the monthly Japanese Yen to US Dollar exchange rate and the seasonally adjusted Japanese and US monthly Consumer Price Index series as the representative of the price levels as available from OECD main economic indicators 2010. Our data set covers a sample period ranging from 1st January1960 to 1st June 2010. The indexing of CPI for both the Japanese and US series is in accordance with assuming the price level of 2005=100. 5. Estimation This section presents the results of the estimations specified in section 2. We start of by presenting the statistical preliminaries and time series plots of the variables to engender a preconception of what can be expected from the estimated equations. a. Statistical preliminaries Table 1 presents the summary statistics for the variables of interest. Note that these are expressed in terms of natural logarithms of the levels. Table 1 Summary Statistics of the variables of interest Figure 1 below depicts the inter-temporal dynamics of the natural logarithm of the series of Japanese Yen to US Dollar Exchange rates. Observe that the series provides a clear visual prove of a downward trend