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 modifed and dynamic OLS approaches, and strongly reject the hypothesis. We also introduce a new between-dimension dynamic OLS estimator and find that the between-dimensio n FMOLS and DOLS estimates of the long-run deviation from purchasing power parity are larger than the correspondin g within-dimension estimates. Finally, we attempt to reconcile these rejections with the mixed findings that have been reported in panel unit root studies.
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Bibliographic InfoPaper provided by Department of Economics, Williams College in its series Department of Economics Working Papers with number 2001-01.
Length: 5 pages
Date of creation: Nov 2001
Date of revision:
Publication status: published in Review of Economics and Statistics, November 2001, v. 83, iss. 4, pp. 727-31
Other versions of this item:
- Peter Pedroni, 2001. "Purchasing Power Parity Tests In Cointegrated Panels," The Review of Economics and Statistics, MIT Press, vol. 83(4), pages 727-731, November.
- Tom Doan, . "PANELDOLS: RATS procedure to perform panel data group mean DOLS," Statistical Software Components RTS00150, Boston College Department of Economics.
- Tom Doan, . "PANELFM: RATS procedure to perform panel data group mean FMOLS," Statistical Software Components RTS00151, Boston College Department of Economics.
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