We investigate two alternative versions of Purchasing Power Parity (PPP): reversion to a constant mean in the spirit of Cassel and reversion to a constant trend in the spirit of Balassa and Samuelson, using long-span real exchange rate data for industrialized countries. We develop unit root...

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...