FURTHER RESULTS ON LONG-RUN PURCHASING POWER PARITY IN THE 1920S

We reexamine long-run purchasing power parity (PPP) for the Dollar/Sterling exchange rate in the 1920s using a three-variable cointegration regression and the new statistics tabulated by Engle and Yoo (1987). Consistent with Taylor and McMahon's (1988) results, we reject cointegration for the Dollar/Sterling exchange rate, the U.K. and the U.S.A. price levels for the sample period February 1921 to May 1925. Contrary to Taylor and McMahon, however, we find only weak evidence of cointegration for the shorter sample period February 1921 to May 1924. © 1990.