Purchasing Power Parity Tests In Cointegrated Panels
This 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 modified and dynamic OLS approaches, and strongly reject the hypothesis. We also introduce a new between-dimension dynamic OLS estimator and find that the between-dimension FMOLS and DOLS estimates of the long-run deviation from purchasing power parity are larger than the corresponding within-dimension estimates. Finally, we attempt to reconcile these rejections with the mixed findings that have been reported in panel unit root studies. © 2001 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology
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Volume (Year): 83 (2001)
Issue (Month): 4 (November)
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- Frankel, Jeffrey A. & Rose, Andrew K., 1996.
"A panel project on purchasing power parity: Mean reversion within and between countries,"
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- Alan M. Taylor, 1996. "International Capital Mobility in History: Purchasing-Power Parity in the Long Run," NBER Working Papers 5742, National Bureau of Economic Research, Inc. Full references (including those not matched with items on IDEAS)
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