Deviations from Purchasing Power Parity: Causes and Welfare Costs

Purchasing Power Parity Hypothesis In OIC Countries: Evidence From Panel Unit Root Tests With Heterogeneous Structural Breaks

IMF Staff Papers - Volume 50, Number 3, 2003 - An Unbiased Appraisal of Purchasing Power Parity by Paul Cashin and C. John McDermott (December 2003)

Univariate studies of the hypothesis of unit roots in real exchange rates have yielded consensus point estimates of the half-life of deviations from purchasing power parity (PPP) of between three to five years (Rogoff, 1996). However, conventional least-squares-based estimates of half-lives are biased downward. Accordingly, as a preferred measure of the persistence of real exchange rate shocks ...

Nonlinear Adjustment Towards Purchasing Power Parity

Reconsidering Convergence Rate to Purchasing Power Parity: Structural Error Correction Model Approach

This paper estimates the speed of the adjustment coefficient in structural error correction models (ECM) and employs a system method for real exchange rates with Hansen and Sargent’s (1980, 1982) IV methods. Empirical results show that the half-lives of purchasing power parity deviations are less than one year in most cases. JEL classification: C22, F31, F41

Purchasing Power Parity Across States and Goods Within Australia

Panel unit root tests show that intranational purchasing power parity (PPP) cannot be rejected across major cities in Australia over the period from 1972 to 1999. The persistence of deviations in response to shocks is low, as measured by the estimated exact half-life of 5 to 7 quarters. This is much lower than results for similar tests done on US cities, and for international PPP tests. The foo...