Does PPP hold in the long run? An empirical approach using wavelets.
This paper contributes to the debate as to whether or not Purchasing Power Parity (PPP) holds in the long run. This is done by looking at fractionally integrated processes (FIP) and using wavelets in order to obtain an Ordinary Least Squares (OLS) estimate of the long run memory parameter. Firstly, drawing on the theoretical framework behind PPP, this paper outlines the statistical background and
