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The Big Mac Standard: A statistical Illustration

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Author Info
Hiroshi Fujiki () (Institute for Monetary and Economic Studies, Bank of Japan)
Yukinobu Kitamura () (Institute of Economic Research, Hitotsubashi University)

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Abstract

We demonstrate a statistical procedure for selecting the most suitable empirical model to test an economic theory, using the example of the test for purchasing power parity based on the Big Mac Index. Our results show that supporting evidence for purchasing power parity, conditional on the Balassa-Samuelson effect, depends crucially on the selection of models, sample periods and economies used for estimations.

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Publisher Info
Article provided by Economics Bulletin in its journal Economics Bulletin.

Volume (Year): 6 (2004)
Issue (Month): 13 ()
Pages: 1-18
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:ebl:ecbull:v:6:y:2004:i:13:p:1-18

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Related research
Keywords: Big Mac Index; Panel Data; Purchasing Power Parity;

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Find related papers by JEL classification:
F3 - International Economics - - International Finance
C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables

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.:

  1. Phillips, P C B & Durlauf, S N, 1986. "Multiple Time Series Regression with Integrated Processes," Review of Economic Studies, Blackwell Publishing, vol. 53(4), pages 473-95, August. [Downloadable!] (restricted)
    Other versions:
  2. Kenneth A. Froot & Kenneth Rogoff, 1996. "Perspectives on PPP and Long-Run Real Exchange Rates," NBER Working Papers 4952, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Phillips, P.C.B., 1986. "Understanding spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 33(3), pages 311-340, December. [Downloadable!] (restricted)
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  4. Carmen M. Reinhart & Kenneth S. Rogoff, 2002. "The Modern History of Exchange Rate Arrangements: A Reinterpretation," NBER Working Papers 8963, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. Kenneth Rogoff, 1996. "The Purchasing Power Parity Puzzle," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 647-668, June. [Downloadable!] (restricted)
  6. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July. [Downloadable!] (restricted)
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  7. Wu, Yangru, 1996. "Are Real Exchange Rates Nonstationary? Evidence from a Panel-Data Test," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(1), pages 54-63, February. [Downloadable!] (restricted)
  8. Ong, Li Lian, 1997. "Burgernomics: the economics of the Big Mac standard," Journal of International Money and Finance, Elsevier, vol. 16(6), pages 865-878, December. [Downloadable!] (restricted)
  9. Ahn, Seung C. & Schmidt, Peter, 1995. "Efficient estimation of models for dynamic panel data," Journal of Econometrics, Elsevier, vol. 68(1), pages 5-27, July. [Downloadable!] (restricted)
  10. Michael R. Pakko & Patricia S. Pollard, 1996. "For here or to go? Purchasing power parity and the Big Mac," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 3-22. [Downloadable!]
  11. Hiroshi Fujiki & Yukinobu Kitamura, 1994. "Feldstein-Horioka Paradox Revisited," Discussion Paper Series a298, Institute of Economic Research, Hitotsubashi University.
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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. Joe Cox, 2008. "Purchasing power parity and cultural convergence: evidence from the global video games market," Journal of Cultural Economics, Springer, vol. 32(3), pages 201-214, September. [Downloadable!] (restricted)
  2. Sidney Caetano & Guilherme Moura & Sergio Da Silva, 2004. "Big Mac parity, income, and trade," Economics Bulletin, Economics Bulletin, vol. 6(12), pages 1-8. [Downloadable!]
    Other versions:
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