IDEAS home Printed from https://ideas.repec.org/a/taf/reroxx/v32y2019i1p2028-2043.html
   My bibliography  Save this article

Does the purchasing power parity fit for China?

Author

Listed:
  • Kai-Hua Wang
  • Chi-Wei Su
  • Ran Tao
  • De-Ping Xiong

Abstract

This paper aims to assess whether the purchasing power parity (PPP) holds by examining the dynamic link between nominal exchange rate (NER) and relative consumer price (RCP) in China. With economic transitions and structural changes existing, we discover that by using full sample data the PPP does not hold. Consequently, we apply the rolling window causality method in order to reconsider the dynamic causal link, and as a result we observe NER having both positive and negative impacts on RCP in some sub-periods. However, RCP has no effect on the NER, meaning that the PPP does not hold. Trade cost, restrictions and imperfect competition are considered in explaining the deviations in some sub-sample periods. Therefore, this empirical result has important implications for stakeholders to distinguish factors that bring about the PPP deviations and further offers policy suggestions for the Chinese monetary authority.

Suggested Citation

  • Kai-Hua Wang & Chi-Wei Su & Ran Tao & De-Ping Xiong, 2019. "Does the purchasing power parity fit for China?," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 32(1), pages 2028-2043, January.
    • Handle: RePEc:taf:reroxx:v:32:y:2019:i:1:p:2028-2043
    DOI: 10.1080/1331677X.2019.1637763
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/1331677X.2019.1637763
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/1331677X.2019.1637763?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:reroxx:v:32:y:2019:i:1:p:2028-2043. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/rero .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.