"Aggregation Bias" DOES Explain the PPP Puzzle

Jean Imbs, Haroon Mumtaz, Morten Ravn and Helene Rey

No 11607, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This article summarizes our views on the role of an "aggregation bias" in explaining the PPP Puzzle, in response to the several papers recently written in reaction to our initial contribution. We discuss in particular the criticisms of Imbs, Mumtaz, Ravn and Rey (2002) presented in Chen and Engel (2005). We show that their contentions are based on: (i) analytical counter-examples which are not empirically relevant; (ii) simulation results minimizing the extent of "aggregation bias"; (iii) unfounded claims on the impact of measurement errors on our results; and (iv) problematic implementation of small-sample bias corrections. We conclude, as in our original paper, that "aggregation bias" goes a long way towards explaining the PPP puzzle.

JEL-codes: C23 F15 F31 (search for similar items in EconPapers)
Date: 2005-09
Note: IFM
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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