The Panel Purchasing Power Parity Puzzle
Does long-run purchasing power parity (PPP) hold over the post-1973 floating exchange rate period? Panel unit root tests provide evidence of PPP that increases with the number of observations. The strengthening of the evidence, however, is highly cyclical. When the dollar appreciates at the end of the sample, the evidence of PPP strengthens and, when it depreciates, the evidence weakens. While these patterns cannot be explained by the specifications that are normally used to model real exchange rates, the strengthening, but not the cyclical pattern, can be explained by a specification that incorporates PPP restricted structural change.
Year of publication: |
2006
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Authors: | Papell, David H. |
Published in: |
Journal of Money, Credit and Banking. - Blackwell Publishing. - Vol. 38.2006, 2, p. 447-467
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Publisher: |
Blackwell Publishing |
Saved in:
Online Resource
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