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Purchasing Power Parity Across States and Goods Within Australia

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Author Info
KAUSIK CHAUDHURI
JEFFREY SHEEN

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Abstract

Panel unit root tests show that intranational purchasing power parity cannot be rejected across major Australian cities from 1972:3 to 1999:1. The persistence of deviations in response to shocks is low, as measured by the estimated exact half-life of between five and ten quarters. This is much lower than results for similar tests done on US cities, and for international purchasing power parity tests. The food CPI is largely responsible for the fast convergent results for city CPIs. Intranational purchasing power parity was rejected for the floating exchange rate period from 1984 to 1991 when inflation was high and not specifically targeted by the central bank. Copyright © 2004 Economic Society of Australia..

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Article provided by The Economic Society of Australia in its journal The Economic Record.

Volume (Year): 80 (2004)
Issue (Month): 250 (09)
Pages: 314-329
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Handle: RePEc:bla:ecorec:v:80:y:2004:i:250:p:314-329

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  6. Cheung, Yin-Wong & Lai, Kon S., 1993. "Long-run purchasing power parity during the recent float," Journal of International Economics, Elsevier, vol. 34(1-2), pages 181-192, February. [Downloadable!] (restricted)
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  12. Chowdhury, Abdur R. & Sdogati, Fabio, 1993. "Purchasing power parity in the major EMS countries: The role of price and exchange rate adjustment," Journal of Macroeconomics, Elsevier, vol. 15(1), pages 25-45. [Downloadable!] (restricted)
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  23. Kenneth Rogoff, 1996. "The Purchasing Power Parity Puzzle," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 647-668, June. [Downloadable!] (restricted)
  24. Culver, Sarah E & Papell, David H, 1997. "Is There a Unit Root in the Inflation Rate? Evidence from Sequential Break and Panel Data Models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 12(4), pages 435-44, July-Aug.. [Downloadable!]
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  28. Culver, Sarah E. & Papell, David H., 1999. "Long-run purchasing power parity with short-run data: evidence with a null hypothesis of stationarity," Journal of International Money and Finance, Elsevier, vol. 18(5), pages 751-768, October. [Downloadable!] (restricted)
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  31. Charles Engel, 1998. "Long-Run PPP May Not Hold After All," Discussion Papers in Economics at the University of Washington 0050, Department of Economics at the University of Washington. [Downloadable!]
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  32. Pasaran, M.H. & Im, K.S. & Shin, Y., 1995. "Testing for Unit Roots in Heterogeneous Panels," Cambridge Working Papers in Economics 9526, Faculty of Economics, University of Cambridge.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Ajit Dayanandan & Mukesh Ralhan, 2005. "Price Index Convergence Among Provinces and Cities of Canada: 1978 - 2001," Econometrics Working Papers 0504, Department of Economics, University of Victoria. [Downloadable!]
  2. Farley Grubb, 2008. "Testing for the Economic Impact of the U.S. Constitution: Purchasing Power Parity across the Colonies versus across the States, 1748-1811," NBER Working Papers 13836, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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