This paper re-assesses the panel (unit root test) evidence for PPP on four monthly data sets. We discuss and illustrate that commonly-used first generation panel unit root tests are inappropriate for PPP analysis since they are constructed for cross-sectionally uncorrelated panels. Given that...

In this letter we model the deviation of the nominal exchange rate from the long run equilibrium level predicted by monetary fundamentals in a nonlinear framework consistent with the presence of transaction costs. We consider a novel approach that allows for the joint testing of nonlinearity and...

Most economists intuitively consider purchasing power parity (PPP) to be true. Nevertheless, quite surprisingly, the empirical literature is not very supportive for PPP. In this paper, however, we find evidence in favor of PPP using a new test. The test is embedded in a Markov regime-switching...

This paper examines exchange-rate volatility with GARCH models using monthly exchange-rate return series from 1985:1 to 2011:7 for Naira/US dollar return and from 2004:1 to 2011:7 for Naira/British Pounds and Naira/Euro returns. The study compare estimates of variants of GARCH models with break...

This paper analyzes the price dynamics of Brazilian cities between 1995 and 2012 to identify stylized facts about price convergence, the reversal speed of deviations between relative prices and purchasing power parity (PPP). There is evidence of a strong reduction in the absolute dispersion of...

In this paper we propose a simple extension to the panel case of the covariate-augmented Dickey Fuller (CADF) test for unit roots developed in Hansen (1995). The extension we propose is based on a p-values combination approach that takes into account cross-section dependence. We show that the...

This study examines the validity of the Purchasing Power Parity (PPP) in four Arab countries that recently experienced political instability, those being Syria, Egypt, Tunisia, and Bahrain. Using monthly data of the real effective exchange rates (REER) of the countries in question from 1995 to...