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Bivariate relative city price convergence in the United States: 1918-1997

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  • Sonora, Robert J.

Abstract

As in international tests of purchasing power parity, panel unit root tests have been successful in rejecting a unit root process in U.S. city relative prices over the period 1918-1997. However, there is an empirical question of what the rejection of a 'panel unit root', particularly with respect to real exchange rates, means. This paper employs a variety of univariate unit root and cointegration tests which have recently come to the fore. These tests improve the power and reduce size distortion found in standard unit root and cointegration tests such as the Dickey-Fuller and Phillips-Perron tests. I find considerable evidence for rejecting a unit root process in the majority of U.S. city relative prices over the entire sample period and two subperiods. Less successful are stationarity tests conducted on regions of the U.S.

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Article provided by Elsevier in its journal Review of Financial Economics.

Volume (Year): 17 (2008)
Issue (Month): 2 ()
Pages: 92-111

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Handle: RePEc:eee:revfin:v:17:y:2008:i:2:p:92-111
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/620170

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Cited by:

  1. Bilgili, Faik, 2011. "City price convergence in Turkey with structural breaks," MPRA Paper 54295, University Library of Munich, Germany.
  2. Burridge, Peter & Iacone, Fabrizio & Lazarová, Štěpána, 2015. "Spatial effects in a common trend model of US city-level CPI," Regional Science and Urban Economics, Elsevier, vol. 54(C), pages 87-98.
  3. Sule Akkoyunlu & Boriss Siliverstovs, 2014. "Does the law of one price hold in a high-inflation environment? A tale of two cities in Turkey," Applied Economics, Taylor & Francis Journals, vol. 46(26), pages 3236-3245, September.
  4. Huang, Ho-Chuan (River) & Liu, Wei-Han & Yeh, Chih-Chuan, 2012. "Convergence in price levels across US cities," Economics Letters, Elsevier, vol. 114(3), pages 245-248.
  5. Lee, Chin, 2015. "Is There Any Regional Price Disparity in Peninsular Malaysia?," MPRA Paper 70592, University Library of Munich, Germany.

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