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Home bias and deviations from purchasing power parity

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  • Mylonidis, Nikolaos

Abstract

Empirical analysis has produced mixed results in testing for PPP. This note presents a simple model linking home bias towards home-produced tradable goods with deviations from absolute PPP. We show that this bias constitutes a significant determinant of PPP deviations.

Suggested Citation

  • Mylonidis, Nikolaos, 2008. "Home bias and deviations from purchasing power parity," Economics Letters, Elsevier, vol. 101(1), pages 38-40, October.
    • Handle: RePEc:eee:ecolet:v:101:y:2008:i:1:p:38-40
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    References listed on IDEAS

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    1. Karen K. Lewis, 1999. "Trying to Explain Home Bias in Equities and Consumption," Journal of Economic Literature, American Economic Association, vol. 37(2), pages 571-608, June.
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    7. Mark Taylor, 2006. "Real exchange rates and Purchasing Power Parity: mean-reversion in economic thought," Applied Financial Economics, Taylor & Francis Journals, vol. 16(1-2), pages 1-17.
    8. Bruce A. Blonigen & Wesley W. Wilson, 1999. "Explaining Armington: What Determines Substitutability Between Home and Foreign Goods?," Canadian Journal of Economics, Canadian Economics Association, vol. 32(1), pages 1-21, February.
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    Cited by:

    1. Dimitrios Sideris, 2011. "Optimum currency areas, structural changes and the endogeneity of the OCA criteria: evidence from six new EU member states," Applied Financial Economics, Taylor & Francis Journals, vol. 21(4), pages 195-206.
    2. Chen, Show-Lin & Wu, Jyh-Lin, 2011. "Home bias and the persistence of real exchange rates," Economic Modelling, Elsevier, vol. 28(1-2), pages 55-59, January.
    3. Aissia, Dorsaf Ben, 2016. "Home and foreign investor sentiment and the stock returns," The Quarterly Review of Economics and Finance, Elsevier, vol. 59(C), pages 71-77.

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    Keywords

    PPP Home bias Panel data;

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