EconPapers    
Economics at your fingertips  
 

Purchasing power parity-symmetry and proportionality: Evidence from 116 countries

Augustine C. Arize, John Malindretos and Dilip Ghosh

International Review of Economics & Finance, 2015, vol. 37, issue C, 69-85

Abstract: This paper examines the cointegration property of exchange rates and prices using techniques that have received limited attention in several studies on the validity of the Purchasing Power Parity (PPP) hypothesis. It provides comprehensive evidence on the PPP hypothesis using recent monthly data for 1971 through 2011 (i.e., 492 observations). The paper also explores the symmetry and proportionality conditions in PPP. In addition, estimates of the short-run dynamics are obtained for each country, utilizing the error–correction technique. Results from long-run cointegration analysis, short-run dynamics and half-lives, all provide evidence for long-run PPP. The symmetry condition is largely supported, and when imposed on prices, the proportionality condition is supported in a majority of cases.

Keywords: PPP; Cointegration; Error correction model (search for similar items in EconPapers)
JEL-codes: C12 C22 F31 F41 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8) Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1059056014001956
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:37:y:2015:i:c:p:69-85

DOI: 10.1016/j.iref.2014.11.014

Access Statistics for this article

International Review of Economics & Finance is currently edited by H. Beladi and C. Chen

More articles in International Review of Economics & Finance from Elsevier
Bibliographic data for series maintained by Haili He ().

 
Page updated 2020-06-20
Handle: RePEc:eee:reveco:v:37:y:2015:i:c:p:69-85