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Deviations from Purchasing Power Parity: Any Role for the Harrod-Balassa-Samuelson Hypothesis?

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  • Manuela Nenna

    ()
    (Ministero dell’Economia e delle Finanze, Roma
    Università «La Sapienza», Roma)

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    Abstract

    The aim of this paper is to explain relative prices divergences among cities within the same currency area, such as Italy. According to our results, we find relative prices mean reverting, but at a very slow rate. The measure of persistence is high also in a well-established “monetary union” such as Italy, where some of the standard reasons behind deviations from the parity are minimised or negligible. In this work, we suggest two main explanations. First, arbitrage impediments due to transportation costs, account for part of this divergence. Second, the Harrod-Balassa-Samuelson effect is also found to be partially responsible for such persistence.

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    Bibliographic Info

    Article provided by SIPI Spa in its journal Rivista di Politica Economica.

    Volume (Year): 92 (2002)
    Issue (Month): 4 (July-August)
    Pages: 167-196

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    Handle: RePEc:rpo:ripoec:v:92:y:2002:i:4:p:167-196

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    Cited by:
    1. Amendola, Nicola & Vecchi, Giovanni & Al Kiswani, Bilal, 2010. "Il costo della vita al Nord e al Sud d'Italia dal dopoguerra a oggi. Stime di prima generazione," MPRA Paper 23486, University Library of Munich, Germany.

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