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Purchasing power parity revisited: evidence from old and new tests for an organisation for economic co-operation and development panel

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  • Julian Ramajo
  • Montserrat Ferre

Abstract

The objective of this article is to study long-run Purchasing Power Parity (PPP) for a panel of 21 Organisation for Economic Co-operation and Development (OECD) countries from the end of the Bretton Woods era by applying a wide range of the econometric techniques available. This will allow us to present a comprehensive up to date examination of the empirical validity of PPP, covering the weak and strong versions of the hypothesis with individual and panel analysis, including the absence or presence of cross-dependency, the linear or nonlinear behaviour of the real exchange rates and the degree of persistence. Overall, the results provide evidence in favour of PPP.

Suggested Citation

  • Julian Ramajo & Montserrat Ferre, 2010. "Purchasing power parity revisited: evidence from old and new tests for an organisation for economic co-operation and development panel," Applied Economics, Taylor & Francis Journals, vol. 42(17), pages 2243-2260.
  • Handle: RePEc:taf:applec:v:42:y:2010:i:17:p:2243-2260
    DOI: 10.1080/00036840701765486
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    References listed on IDEAS

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    1. Breitung, Jörg & Pesaran, Mohammad Hashem, 2005. "Unit roots and cointegration in panels," Discussion Paper Series 1: Economic Studies 2005,42, Deutsche Bundesbank.
    2. Christian Gengenbach & Franz C. Palm & Jean-Pierre Urbain, 2010. "Panel Unit Root Tests in the Presence of Cross-Sectional Dependencies: Comparison and Implications for Modelling," Econometric Reviews, Taylor & Francis Journals, vol. 29(2), pages 111-145, April.
    3. Guglielmo Maria Caporale & Mario Cerrato, 2006. "Panel data tests of PPP: a critical overview," Applied Financial Economics, Taylor & Francis Journals, vol. 16(1-2), pages 73-91.
    4. Badi H. Baltagi & Chihwa Kao, 2000. "Nonstationary Panels, Cointegration in Panels and Dynamic Panels: A Survey," Center for Policy Research Working Papers 16, Center for Policy Research, Maxwell School, Syracuse University.
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    Cited by:

    1. Eric A. Hanushek & Guido Schwerdt & Ludger Woessmann & Lei Zhang, 2017. "General Education, Vocational Education, and Labor-Market Outcomes over the Lifecycle," Journal of Human Resources, University of Wisconsin Press, vol. 52(1), pages 48-87.
    2. Wiberg, Magnus, 2011. "The Comparative Political Economy of Economic Geography," Research Papers in Economics 2011:21, Stockholm University, Department of Economics.
    3. Klaus Nowotny, 2011. "Welfare Magnets, Taxation and the Location Decisions of Migrants to the EU," WIFO Working Papers 393, WIFO.
    4. Mahir Binici & Mehmet Yörükoglu, 2011. "Capital flows in the post-global financial crisis era: implications for financial stability and monetary policy," BIS Papers chapters,in: Bank for International Settlements (ed.), Capital flows, commodity price movements and foreign exchange intervention, volume 57, pages 319-343 Bank for International Settlements.
    5. Bank for International Settlements, 2011. "The influence of external factors on monetary policy frameworks and operations," BIS Papers, Bank for International Settlements, number 57, November.

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