QUANTIFYING THE NON-STATIONARITY IN IRISH REAL EXCHANGE-RATES

Empirical work, both in Ireland and elsewhere, has found little eviden ce for the proposition that log-real exchange rates are stationary, im plying that the purchasing power parity (PPP) relation cannot hold, no t even in a long-run equilibrium. Using techniques proposed by Cochran e (1988), we aim to quantify the magnitude of that non-stationarity in Irish/German and Irish/UK data during the EMS period. In this way we can assess how empirically important deviations from PPP are. At least in the case of Irish/German data, the non-stationarity in the log rea l exchange rate appears to be small.