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Purchasing Power Parity Across States and Goods Within Australia

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  • KAUSIK CHAUDHURI
  • JEFFREY SHEEN

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.

Suggested Citation

  • Kausik Chaudhuri & Jeffrey Sheen, 2004. "Purchasing Power Parity Across States and Goods Within Australia," The Economic Record, The Economic Society of Australia, vol. 80(250), pages 314-329, September.
    • Handle: RePEc:bla:ecorec:v:80:y:2004:i:250:p:314-329
    DOI: 10.1111/j.1475-4932.2004.00191.x
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    Cited by:

    1. Hiranya K. Nath & Jayanta Sarkar, 2014. "City Relative Price Dynamics in Australia: Are Structural Breaks Important?," The Economic Record, The Economic Society of Australia, vol. 90(288), pages 33-48, March.
    2. Long Hai Vo, 2023. "Understanding International Price and Consumption Disparities," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 69(2), pages 443-473, June.
    3. 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," Working Papers 08-11, University of Delaware, Department of Economics.
    4. Hai Long Vo & Duc Hong Vo, 2023. "The purchasing power parity and exchange‐rate economics half a century on," Journal of Economic Surveys, Wiley Blackwell, vol. 37(2), pages 446-479, April.
    5. Lee, Chin, 2015. "Is There Any Regional Price Disparity in Peninsular Malaysia?," MPRA Paper 70592, University Library of Munich, Germany.
    6. Lee, Chin & Habibullah, Muzafar Shah, 2008. "Price convergence and market integration: evidence from Malaysia," MPRA Paper 40408, University Library of Munich, Germany.
    7. Ming-Jen Chang, 2016. "Half-Life Deviations From Purchasing Power Parity: Evidence From Pacific Rim Countries," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 61(04), pages 1-20, September.
    8. Woo, Kai-Yin & Lee, Shu-Kam, 2009. "Detecting intra-national PPP model in China: A median-unbiased estimation approach," Economic Modelling, Elsevier, vol. 26(5), pages 1029-1032, September.
    9. Woo, Kai-Yin & Lee, Shu-Kam & Chan, Alan, 2014. "Non-linear adjustments to intranational PPP," Journal of Macroeconomics, Elsevier, vol. 40(C), pages 360-371.
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