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Price Index Convergence Among Provinces and Cities of Canada: 1978 - 2001

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Abstract

We study the convergence of price indices for Canadian provinces and cities for the period 1978-2001 for (a) ten provinces and nine commodity/price groups; and (b) fifteen cities a cross Canada and four commodity/price groups using panel unit root tests. The empirical results reject the unit root hypothesis for price data across provinces and cities. The estimated rate of convergence in Canada is comparatively faster than the rates for similar studies reported for U.S. c ities. The empirical results also reveal a relatively faster rate of convergence during the post-inflation targeting period (1991-2001), than earlier.

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File URL: http://www.uvic.ca/socialsciences/economics/assets/docs/econometrics/ewp0504.pdf
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Bibliographic Info

Paper provided by Department of Economics, University of Victoria in its series Econometrics Working Papers with number 0504.

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Length: 15 pages
Date of creation: 05 May 2005
Date of revision:
Handle: RePEc:vic:vicewp:0504

Note: ISSN 1485-6441
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Postal: PO Box 1700, STN CSC, Victoria, BC, Canada, V8W 2Y2
Phone: (250)721-6197
Fax: (250)721-6214
Web page: http://web.uvic.ca/econ
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Keywords: Intra-national PPP; Panel unit root; Canada; CPI; Half-life;

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References

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  1. Charles Engel & John H. Rogers, 2000. "Violating the Law of One Price: Should We Make a Federal Case Out of It?," Working Papers, University of Washington, Department of Economics 0027, University of Washington, Department of Economics.
  2. Perron, Pierre, 1997. "Further evidence on breaking trend functions in macroeconomic variables," Journal of Econometrics, Elsevier, Elsevier, vol. 80(2), pages 355-385, October.
  3. Culver, Sarah E. & Papell, David H., 1999. "Long-run purchasing power parity with short-run data: evidence with a null hypothesis of stationarity," Journal of International Money and Finance, Elsevier, Elsevier, vol. 18(5), pages 751-768, October.
  4. Ng, S. & Perron, P., 1994. "Unit Root Tests ARMA Models with Data Dependent Methods for the Selection of the Truncation Lag," Cahiers de recherche, Universite de Montreal, Departement de sciences economiques 9423, Universite de Montreal, Departement de sciences economiques.
  5. Peter Pedroni, 2001. "Purchasing Power Parity Tests in Cointegrated Panels," Department of Economics Working Papers 2001-01, Department of Economics, Williams College.
  6. Engel, Charles & Rogers, John H, 1996. "How Wide Is the Border?," American Economic Review, American Economic Association, American Economic Association, vol. 86(5), pages 1112-25, December.
  7. McCallum, John, 1995. "National Borders Matter: Canada-U.S. Regional Trade Patterns," American Economic Review, American Economic Association, American Economic Association, vol. 85(3), pages 615-23, June.
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  9. John F. Helliwell, 1996. "Do National Borders Matter for Quebec's Trade?," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 29(3), pages 507-22, August.
  10. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, Elsevier, vol. 108(1), pages 1-24, May.
  11. Kenneth Rogoff, 1996. "The Purchasing Power Parity Puzzle," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 647-668, June.
  12. Stephen Cecchetti & Nelson C. Mark & Robert Sonora, 1998. "Price Level Convergence Among United States Cities: Lessons for the European Central Bank," Working Papers, Oesterreichische Nationalbank (Austrian Central Bank) 32, Oesterreichische Nationalbank (Austrian Central Bank).
  13. Janet Ceglowski, 2003. "The law of one price: intranational evidence for Canada," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 36(2), pages 373-400, May.
  14. Dodge, David, 2002. "Inflation targeting in Canada: Experience and lessons," The North American Journal of Economics and Finance, Elsevier, Elsevier, vol. 13(2), pages 113-124, August.
  15. Sarno, Lucio & Taylor, Mark P, 1997. "The Behaviour of Real Exchange Rates During the Post-Bretton Woods Period," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1730, C.E.P.R. Discussion Papers.
  16. Oh, Keun-Yeob, 1996. "Purchasing power parity and unit root tests using panel data," Journal of International Money and Finance, Elsevier, Elsevier, vol. 15(3), pages 405-418, June.
  17. Banerjee, Anindya, 1999. " Panel Data Unit Roots and Cointegration: An Overview," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 607-29, Special I.
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  19. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, Econometric Society, vol. 49(6), pages 1417-26, November.
  20. repec:wop:syecwp:2001-2 is not listed on IDEAS
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Citations

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Cited by:
  1. Chien-Chiang Lee & Chun-Ping Chang, 2007. "Mean reversion of inflation rates in 19 OECD countries: Evidence from panel Lm unit root tests with structural breaks," Economics Bulletin, AccessEcon, vol. 3(23), pages 1-15.
  2. Hwa-Taek Lee & Gawon Yoon, 2013. "Does purchasing power parity hold sometimes? Regime switching in real exchange rates," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 45(16), pages 2279-2294, June.
  3. Gordon Wilkinson, 2011. "The Behaviour of Consumer Prices Across Provinces," Discussion Papers 11-2, Bank of Canada.
  4. repec:ebl:ecbull:v:3:y:2007:i:23:p:1-15 is not listed on IDEAS
  5. Angelos Liontakis & Dimitris Kremmydas, 2013. "Food Inflation in EU: Distribution Analysis and Spatial Effects," Working Papers 2013-3, Agricultural University of Athens, Department Of Agricultural Economics.
  6. Liontakis, Angelos E. & Papadas, Christos T., 2009. "Distribution Dynamics of Food Price Inflation Rates in EU: An Alternative Conditional Density Estimator Approach," 113th Seminar, September 3-6, 2009, Chania, Crete, Greece, European Association of Agricultural Economists 58084, European Association of Agricultural Economists.
  7. Angelos Liontakis & Christos T. Papadas, 2010. "Distribution Dynamics of Food Price Inflation Rates in EU: An Alternative Conditional Density Estimator Approach," Working Papers 2010-6, Agricultural University of Athens, Department Of Agricultural Economics.

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