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Speed of Reversion of Deviations of the Purchasing Power Parity for Brazilian Cities

Felipe de Sousa Bastos, Roberto Ferreira () and Elano Ferreira Arruda

Revista Brasileira de Economia - RBE, 2018, vol. 72, issue 1

Abstract: This work estimates the rate of reversion of deviations from the PPP for Brazilian cities considering three possible sources of bias: i) Nickell, ii) the heterogeneity of the autoregressive coefficients and iii) generated by the temporal aggregation of price indices. The values of the estimated half-lives were approximately 4.41 and 3.18 years when considering the price index of Brazil and the average of the indices of cities as references, respectively. When using the price index for each city as the numeraire, the median half-life is 3.13 years.

Date: 2018
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