Does inflation targeting matter for PPP? An empirical investigation

Hui Ding and Jaebeom Kim

Applied Economics Letters, 2012, vol. 19, issue 18, 1777-1780

Abstract: This article examines whether Inflation Targeting (IT) matters for long-run Purchasing Power Parity (PPP). For this purpose, we formally assess the evidence on PPP for a panel of 19 countries using two price indices and two panel unit root tests with cross-sectional dependence. The empirical results show that IT plays an important role in providing favourable evidence for long-run PPP.

Date: 2012
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DOI: 10.1080/13504851.2012.659336

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