Advanced Search
MyIDEAS: Login

Purchasing Power Parity Revisited: A Time-Varying Parameter Approach

Contents:

Author Info

  • Tarkan Cavusoglu

    ()
    (Hacettepe University, Department of Public Finance, Beytepe, 06810, Ankara, Turkey)

  • Erdinc Telatar

    ()
    (Hacettepe University, Department of Economics, Beytepe, 06810, Ankara, Turkey)

Abstract

We re-examine the validity of Purchasing Power Parity (PPP) proposition using Taylor's (2002) data set. Applying the Kalman filter process, our findings not only demonstrate the strong instability in the relationship between the dollar denominated foreign price levels and the US price level, but also rule out the empirical validity of the PPP hypothesis. Thus, we argue that the inference based on the Fisher-Seater methodology cannot account for the Lucas critique in the PPP testing procedure.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.accessecon.com/Pubs/EB/2011/Volume31/EB-11-V31-I3-P243.pdf
Download Restriction: no

Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 31 (2011)
Issue (Month): 3 ()
Pages: 2701-2708

as in new window
Handle: RePEc:ebl:ecbull:eb-11-00620

Contact details of provider:

Related research

Keywords: Purchasing power parity; Fisher-Seater; time-varying parameter; Kalman filter;

Find related papers by JEL classification:

References

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.:
as in new window
  1. Frederick H. Wallace & Gary L. Shelley, 2005. "An Alternative Test of Purchasing Power Parity," International Finance 0502009, EconWPA.
  2. Fisher, Mark E & Seater, John J, 1993. "Long-Run Neutrality and Superneutrality in an ARIMA Framework," American Economic Review, American Economic Association, vol. 83(3), pages 402-15, June.
  3. Mohsen Bahmani-Oskooee & Scott W. Hegerty, 2009. "Purchasing Power Parity In Less-Developed And Transition Economies: A Review Paper," Journal of Economic Surveys, Wiley Blackwell, vol. 23(4), pages 617-658, 09.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ebl:ecbull:eb-11-00620. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (John P. Conley).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.