Weak-form and strong-form purchasing power parity between the US and Mexico: A panel cointegration investigation

Raymond Robertson, Anil Kumar and Donald Dutkowsky ()

Journal of Macroeconomics, 2014, vol. 42, issue C, 241-262

Abstract: This study examines the long-run relationship between US and Mexican prices. We use panel cointegration techniques that allow for heterogeneous relationships across goods to examine the existence of weak-form and strong-form Purchasing Power Parity (PPP) between the US and Mexico. We construct and work with a panel of highly disaggregated data, matched prices of individual products sold in each country. Our findings provide overwhelming support for weak-form PPP, but less support for strong-form PPP. Strong-form PPP, though, emerges among actively-traded goods. In contrast, non-traded goods exhibit amplified reaction to price changes in Mexico relative to those from the US.

Keywords: Purchasing Power Parity (PPP); Weak-form PPP; Strong-form PPP; Cointegration; Mexico (search for similar items in EconPapers)
JEL-codes: F31 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:42:y:2014:i:c:p:241-262

DOI: 10.1016/j.jmacro.2014.08.005

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