We investigate the purchasing power parity hypothesis for a group of 17 countries using a new panel based test of stationarity that allows for arbitrary cross-sectional dependence. We treat the short run time series dynamics non-parametrically and thus avoid the need to fit separate, and...

Augmented Dickey-Fuller regressions on pooled (but not individual) real exchange rates for the post-1973 period consistently reject the unit root null, even after accounting for cross-sectional dependence. The inference that the series is stationary, however, is not necessarily correct, because...