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Purchasing Power Parity Tests In Cointegrated Panels

Peter Pedroni

The Review of Economics and Statistics, 2001, vol. 83, issue 4, 727-731

Abstract: This paper employs recently developed techniques for testing hypotheses in cointegrated panels to test the strong version of purchasing power parity for a panel of post Bretton Woods data. We compare results using fully modified and dynamic OLS approaches, and strongly reject the hypothesis. We also introduce a new between-dimension dynamic OLS estimator and find that the between-dimension FMOLS and DOLS estimates of the long-run deviation from purchasing power parity are larger than the corresponding within-dimension estimates. Finally, we attempt to reconcile these rejections with the mixed findings that have been reported in panel unit root studies. © 2001 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology

Date: 2001
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Working Paper: Purchasing Power Parity Tests in Cointegrated Panels (2001) Downloads
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