Purchasing Power Parity Under the Current Float
8 Pages Posted: 28 Apr 2009 Last revised: 7 May 2009
Date Written: 2007
Abstract
Purchasing power parity (PPP) is an important benchmark model in international finance. Recent literature emphasizes that panel unit root tests have higher power than univariate unit root tests. The results from the ADF unit root test also support the recent literature. Using four panel data unit root tests for the 1990:1 - 2006:3 period, we re-examine the PPP both for developed countries and emerging market economies during the floating exchange rate period. Our empirical results fail to support long-run PPP for both developed countries and emerging market economies.
Keywords: PPP, panel unit root tests, developed countries, emerging market economies
JEL Classification: C22, C23, E31, F31
Suggested Citation: Suggested Citation
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