Is absolute purchasing power parity special for Spain?

Zhibai Zhang (), Zhicun Bian () and Minghua Zhan ()
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Zhibai Zhang: Nanjing University of Finance and Economics
Zhicun Bian: Nanjing University of Finance and Economics
Minghua Zhan: Guangdong University of Foreign Studies

Empirical Economics, 2022, vol. 62, issue 2, No 8, 513-531

Abstract: Abstract Previous researches reveal that the validity of absolute purchasing power parity (APPP) may be weak or special for Spain. Thus, we explore the failure or the special character of APPP by examining 18 bilateral real exchange rates (RERs) between Spain and its main trade partners. Previous testing methods in this use are reduced and improved. The validity of APPP for these RERs is found to be very weak in general. Though the Penn effect is found to fail in some cases, it still plays a dominant role in general, whether examined from the rule of thumb or from the econometric analysis.

Keywords: Absolute purchasing power parity; Real exchange rate; Spain (search for similar items in EconPapers)
JEL-codes: F (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s00181-021-02038-y

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