Testing Symmetry and Proportionality in PPP: A Panel Data Approach
University of British Columbia Finance WP No. 97-11
33 Pages Posted: 27 Feb 1999
There are 2 versions of this paper
Testing Symmetry and Proportionality in PPP: A Panel Data Approach
Testing Symmetry and Proportionality in PPP: A Panel Data Approach
Date Written: November 1998
Abstract
Purchasing power parity (PPP) is a proposition equating the nominal exchange rate to the ratio of the domestic to foreign price levels. This paper employs Bayesian panel data methods to test for PPP, in particular, the implied symmetry and proportionality conditions. Using a data set of all the OECD member countries in the post-Bretton Woods era, we do not find support for symmetry and proportionality in PPP over time and across countries.
JEL Classification: F31, C11, C33
Suggested Citation: Suggested Citation
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