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Evidence on the purchasing power parity in a panel of cities

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  • Josep LluIs Carrion-I-Silvestre
  • Tomas Del Barrio
  • Enrique Lopez-Bazo

Abstract

Evidence is provided on the PPP hypothesis using a sample of 50 Spanish cities for a long time period through the application of panel data unit root tests. Although results suggest non-rejection of the PPP, short-run deviations - as measured by half-lives - indicate that real factors might be causing a slow rate of convergence to a common price index, even in highly integrated economies.

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  • Josep LluIs Carrion-I-Silvestre & Tomas Del Barrio & Enrique Lopez-Bazo, 2004. "Evidence on the purchasing power parity in a panel of cities," Applied Economics, Taylor & Francis Journals, vol. 36(9), pages 961-966.
    • Handle: RePEc:taf:applec:v:36:y:2004:i:9:p:961-966
    DOI: 10.1080/0003684042000233186
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    2. Domingo Rodríguez Benavides & Abigail Rodríguez Nava, 2019. "Convergencia de los precios locales en México: un enfoque de pruebas entre pares/Convergence of local prices in Mexico: A pairwise approach," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 34(2), pages 309-332.
    3. Hiranya K. Nath & Jayanta Sarkar, 2009. "Unbiased Estimation of the Half-Life to Price Index Convergence among U.S. Cities," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(5), pages 1041-1046, August.
    4. repec:qut:auncer:2013_01 is not listed on IDEAS
    5. Mohsen Bahmani-Oskooee & Ali Kutan & Su Zhou, 2009. "Towards solving the PPP puzzle: evidence from 113 countries," Applied Economics, Taylor & Francis Journals, vol. 41(24), pages 3057-3066.
    6. Elie Bouri & Tsangyao Chang & Rangan Gupta, 2016. "Testing the Efficiency of the Wine Market using Unit Root Tests with Sharp and Smooth Breaks," Working Papers 201664, University of Pretoria, Department of Economics.
    7. Hegwood, Natalie D. & Nath, Hiranya K., 2013. "Structural breaks and relative price convergence among US cities," Journal of Macroeconomics, Elsevier, vol. 36(C), pages 150-160.
    8. Mustafa Çakır, 2023. "Regional inflation spillovers in Turkey," Economic Change and Restructuring, Springer, vol. 56(2), pages 959-980, April.
    9. Hwa-Taek Lee & Gawon Yoon, 2013. "Does purchasing power parity hold sometimes? Regime switching in real exchange rates," Applied Economics, Taylor & Francis Journals, vol. 45(16), pages 2279-2294, June.
    10. Christophe Andre & Mehmet Balcilar & Tsangyao Chang & Luis Alberiko Gil-Alana & Rangan Gupta, 2018. "Current account sustainability in G7 and BRICS: Evidence from a long-memory model with structural breaks," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 27(6), pages 638-654, August.
    11. Kristian Jonsson, 2006. "Time-specific disturbances and cross-sectional dependency in a small-sample heterogeneous panel data unit root test," Applied Economics, Taylor & Francis Journals, vol. 38(11), pages 1309-1317.
    12. Mohsen Bahmani-Oskooee & Tsangyao Chang & Tsungpao Wu, 2014. "Revisiting purchasing power parity in African countries: panel stationary test with sharp and smooth breaks," Applied Financial Economics, Taylor & Francis Journals, vol. 24(22), pages 1429-1438, November.
    13. Hiranya K. Nath & Jayanta Sarkar, 2014. "City Relative Price Dynamics in Australia: Are Structural Breaks Important?," The Economic Record, The Economic Society of Australia, vol. 90(288), pages 33-48, March.
    14. Jingfei Wu & Mohsen Bahmani-Oskooee & Tsangyao Chang, 2018. "Revisiting purchasing power parity in G6 countries: an application of smooth time-varying cointegration approach," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 45(1), pages 187-196, February.
    15. Mohsen Bahmani-Oskooee & Tsangyao Chang & Tsung-Pao Wu, 2015. "Purchasing Power Parity in Transition Countries: Panel Stationary Test with Smooth and Sharp Breaks," IJFS, MDPI, vol. 3(2), pages 1-9, May.
    16. Goodness C. Aye & Tsangyao Chang & Wen-Yi Chen & Rangan Gupta & Mark Wohar, 2016. "Testing the Efficiency of the Art Market using Quantile-Based Unit Root Tests with Sharp and Smooth Breaks," Working Papers 201625, University of Pretoria, Department of Economics.
    17. Lee, Chin & Habibullah, Muzafar Shah, 2008. "Price convergence and market integration: evidence from Malaysia," MPRA Paper 40408, University Library of Munich, Germany.
    18. Felipe S. Bastos & Elano F. Arruda & Rafael B. Barbosa & Roberto T. Ferreira, 2018. "Speed of Reversion to PPP with Structural Breaks for Brazilian Cities," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 10(4), pages 15-24, April.
    19. Lee, Chin, 2015. "Is There Any Regional Price Disparity in Peninsular Malaysia?," MPRA Paper 70592, University Library of Munich, Germany.
    20. Lean Hooi Hooi & Russell Smyth, 2007. "Are Asian real exchange rates mean reverting? Evidence from univariate and panel LM unit root tests with one and two structural breaks," Applied Economics, Taylor & Francis Journals, vol. 39(16), pages 2109-2120.
    21. Woo, Kai-Yin & Lee, Shu-Kam & Chan, Alan, 2014. "Non-linear adjustments to intranational PPP," Journal of Macroeconomics, Elsevier, vol. 40(C), pages 360-371.
    22. Chmelarova, Viera & Nath, Hiranya K., 2010. "Relative price convergence among US cities: Does the choice of numeraire city matter?," Journal of Macroeconomics, Elsevier, vol. 32(1), pages 405-414, March.
    23. Mohsen Bahmani Oskooee & Magda Kandil, 2007. "Real and nominal effective exchange rates in MENA countries: 1970-2004," Applied Economics, Taylor & Francis Journals, vol. 39(19), pages 2489-2501.

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