New panel unit root tests of PPP

We use the new panel unit root tests [Im, K.S., Pesaran, M.H., Shin, Y., 1995. Testing for unit roots in heterogenous panels. WP 9526, DAE, University of Cambridge. Revised March 1997] to analyse the stationarity of real exchange rates for the G10 economies and Switzerland. Our results for monthly data 1973–96 indicate mean reversion in real exchange rates and a half life of under three years for one-off shocks.