Franses, Ph.H.B.F.; Dijk, D.J.C. van - Erasmus University Rotterdam, Econometric Institute - 2002
The so-called Balassa-Samuelson model implies that relative prices of non-traded goods may be nonstationary and, hence, that PPP should preferably be tested on real exchange rates based on prices of traded goods only. We propose a simple test for PPP among traded goods which can be applied to...