Big Mac Parity, Income, and Trade
Nontraded inputs account for the lion's share of a Big Mac price (Ong 1997, Parsley and Wei 2003). Major departures from Big Mac PPP may then be explained by the Balassa-Samuelson income differences effect, as shown e.g. by Click (1996). But it has been argued that Click''s result is not robust to changing estimation methods, sample of countries, and time period (Fujiki and Kitamura 2003). Here we address a key theoretical distinction between high and low income countries for the Balassa-Samuelson effect to be properly evaluated. Since this distinction is missing in Click''s analysis, we revisit his finding and take a sample which is distinct (in terms of both set of countries and time period) to meet Fujiki-Kitamura''s criticism. We find that distinguishing high from low income makes no harm to Click''s result. But we also find that openness to trade (viewed as a proxy for trade barriers) helps to explain departures from Big Mac PPP.
(This abstract was borrowed from another version of this item.)
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
| Length: | |
| Date of creation: | 20 Jul 2004 |
| Date of revision: | |
| Handle: | RePEc:wpa:wuwpif:0407011 |
| Note: | Type of Document - pdf |
| Contact details of provider: | Web page: http://128.118.178.162
|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ong, Li Lian, 1997. "Burgernomics: the economics of the Big Mac standard," Journal of International Money and Finance, Elsevier, vol. 16(6), pages 865-878, December.
- Click, Reid W., 1996. "Contrarian MacParity," Economics Letters, Elsevier, vol. 53(2), pages 209-212, November.
- De Vries, C.G. & Leuven, K.U., 1994. "Stylized Facts of Nominal Exchange Rate Returns," Papers 94-002, Purdue University, Krannert School of Management - Center for International Business Education and Research (CIBER).
- J. A. Hausman, 1976.
"Specification Tests in Econometrics,"
Working papers
185, Massachusetts Institute of Technology (MIT), Department of Economics.
- Hausman, Jerry A, 1978. "Specification Tests in Econometrics," Econometrica, Econometric Society, vol. 46(6), pages 1251-71, November.
- Fujiki, Hiroshi & Kitamura, Yukinobu, 2003.
"The Big Mac Standard: A Statistical Illustration,"
Discussion Paper Series
a446, Institute of Economic Research, Hitotsubashi University.
- Yukinobu Kitamura & Hiroshi Fujiki, 2004. "The Big Mac Standard: A statistical Illustration," Economics Bulletin, AccessEcon, vol. 6(13), pages 1-18.
- Engel, C., 1996.
"Accounting for U.S. Real Exchange Rate Changes,"
Working Papers
96-02, University of Washington, Department of Economics.
- Charles Engel, 1999. "Accounting for U.S. Real Exchange Rate Changes," Journal of Political Economy, University of Chicago Press, vol. 107(3), pages 507-538, June.
- Charles Engel, 1995. "Accounting for U.S. Real Exchange Rate Changes," NBER Working Papers 5394, National Bureau of Economic Research, Inc.
- Engel, C., 1996. "Accounting for U.S. Real Exchange Rate Changes," Discussion Papers in Economics at the University of Washington 96-02, Department of Economics at the University of Washington.
- Bela Balassa, 1964. "The Purchasing-Power Parity Doctrine: A Reappraisal," Journal of Political Economy, University of Chicago Press, vol. 72, pages 584.
This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.
When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpif:0407011. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA)
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.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.