Long-run purchasing power parity with asymmetric adjustment: further evidence from China

This study applies threshold cointegration test advanced by Enders and Siklos (2001) to investigate the properties of asymmetric adjustment in long-run Purchasing Power Parity (PPP) for China during the period of March 1985 to September 2008. Although there is evidence of long-run PPP for China, when both the United States and Japan are served as the base country, the adjustment mechanism is asymmetric only when the United States is served as the base country. These results have particularly important policy implications for China.