In this post, I present a case study of testing for the empirical validity of the purchasing power parity. Purchasing power parity is a fundamental relationship in international finance, which has been a subject of extensive research interests. I demonstrate how it can be tested empirically, using the basic economeric methods and time series data for real exchange rates for Australia.
The details of the case study and R codes are in the pdf file, with the data sets in the zip file.
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