Purchasing Power Parity Tests In Cointegrated Panels
AbstractThis paper employs recently developed techniques for testing hypotheses in cointegrated panels to test the strong version of purchasing power parity for a panel of post Bretton Woods data. We compare results using fully modified and dynamic OLS approaches, and strongly reject the hypothesis. We also introduce a new between-dimension dynamic OLS estimator and find that the between-dimension FMOLS and DOLS estimates of the long-run deviation from purchasing power parity are larger than the corresponding within-dimension estimates. Finally, we attempt to reconcile these rejections with the mixed findings that have been reported in panel unit root studies. © 2001 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology
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Bibliographic InfoArticle provided by MIT Press in its journal The Review of Economics and Statistics.
Volume (Year): 83 (2001)
Issue (Month): 4 (November)
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Web page: http://mitpress.mit.edu/journals/
Other versions of this item:
- Peter Pedroni, 2001. "Purchasing Power Parity Tests in Cointegrated Panels," Department of Economics Working Papers 2001-01, Department of Economics, Williams College.
- Tom Doan, . "RATS programs to replicate Pedroni PPP tests on panel data," Statistical Software Components RTZ00132, Boston College Department of Economics.
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