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Purchasing Power Parity For Developing And Developed Countries. What Can We Learn From Non-Stationary Panel Data Models?

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  • Imed Drine
  • Christophe Rault

Abstract

The aim of this paper is to apply recently developed panel cointegration techniques proposed by Pedroni ( Oxford Bulletin of Economics and Statistics 61 (1999): Supplement, 653-670; Econometric Theory 20 (2004): 597-625) and generalized by Banerjee and Carrion-i-Silvestre (Working Paper 591, European Central Bank, February 2006) to examine the robustness of the PPP concept for a sample of 80 developed and developing countries. We find that strong PPP is verified for OECD countries and weak PPP for Middle East and North African countries. However, in African, Asian, Latin American and Central and Eastern European countries, PPP does not seem relevant to characterize the long-run behavior of the real exchange rate. Further investigations indicate that the nature of the exchange rate regime does not condition the validity of PPP, which is more easily accepted in countries with high rather than low inflation. Copyright � 2008 The Authors. Journal compilation � 2008 Blackwell Publishing Ltd.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Journal of Economic Surveys.

Volume (Year): 22 (2008)
Issue (Month): 4 (09)
Pages: 752-773

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Handle: RePEc:bla:jecsur:v:22:y:2008:i:4:p:752-773

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Cited by:
  1. Mohamed El Hedi Arouri & Adel Ben Youssef & Hatem M'Henni & Christophe Rault, 2014. "Energy Use and Economic Growth in Africa: A Panel Granger-Causality Investigation," CESifo Working Paper Series 4844, CESifo Group Munich.
  2. Guglielmo Maria Caporale & Thouraya Hadj Amor & Christophe Rault, 2011. "Sources of Real Exchange Rate Volatility and International Financial Integration: A Dynamic GMM Panel Approach," CESifo Working Paper Series 3645, CESifo Group Munich.
  3. Noman, Abdullah, 2008. "Testing for PPP in the Mean-Group Panel Regression Framework: Further Evidence," MPRA Paper 7825, University Library of Munich, Germany.
  4. repec:ebl:ecbull:v:6:y:2008:i:20:p:1-12 is not listed on IDEAS
  5. Sahbi Farhani & Sana Mrizak & Anissa Chaibi & Christophe Rault, 2014. "The environmental Kuznets curve and sustainability: A panel data analysis," Working Papers 2014-300, Department of Research, Ipag Business School.
  6. Diana Sadoveanu & Nicolae Ghiba, 2012. "Purchasing Power Parity: Evidence From Four Cee Countries," Journal of Academic Research in Economics, Spiru Haret University, Faculty of Accounting and Financial Management Constanta, vol. 4(1 (March)), pages 80-89.
  7. Aoki, Takaaki, 2008. "One Proposition about Dynamic Portfolio Selection in an Open Economy and International Diversification," MPRA Paper 20563, University Library of Munich, Germany.
  8. Noman, Abdullah, 2008. "Purchasing Power Parity in South Asia: A Panel Data Approach," MPRA Paper 7824, University Library of Munich, Germany.
  9. Su, Chi-Wei & Tsangyao, Chang & Chang, Hsu-Ling, 2011. "Purchasing power parity for fifteen Latin American countries: Stationary test with a Fourier function," International Review of Economics & Finance, Elsevier, vol. 20(4), pages 839-845, October.
  10. He, Huizhen & Chou, Ming Che & Chang, Tsangyao, 2014. "Purchasing power parity for 15 Latin American countries: Panel SURKSS test with a Fourier function," Economic Modelling, Elsevier, vol. 36(C), pages 37-43.
  11. Yutaka Kurihara, 2009. "Is Purchasing Power Parity Hypothesis Reasonable from the View of Trade Blocks and Currency Zones?," European Research Studies Journal, European Research Studies Journal, vol. 0(3), pages 3-14.

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