Economics at your fingertips  

Purchasing Power Parity and the Law of One Price: Evidence from Commodity Prices in Asian Countries

Mohsen Bahmani-Oskooee and Nasir Abm ()
Additional contact information
Nasir Abm: School of Business, North Carolina Central University, Durham, NC 27707, USA

Global Economy Journal (GEJ), 2015, vol. 15, issue 2, 231-240

Abstract: Almost all previous studies that have tested the law of one price or Purchasing Power Parity theory (PPP) have used either real effective exchange rates or bilateral real exchange rates which are constructed using CPI or PPI data. Most of these studies have failed to support the PPP mostly due to aggregation bias. A few recent studies, have, therefore used commodity prices in different countries and have provided strong support for the theory. These studies have mostly used data from industrial countries. In this paper, we use individual prices of 52 retail items from 15 cities in Asia and test for stationarity of the real exchange rate and speed of adjustment. We provide support for PPP in 63% of the cases. We also find that using individual prices lead to faster convergence of real rates toward their PPP values.

Keywords: PPP; commodity prices; Asian countries (search for similar items in EconPapers)
Date: 2015
References: Add references at CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
Access to full text is restricted to subscribers

Related works:
Journal Article: Purchasing Power Parity and the Law of One Price: Evidence from Commodity Prices in Asian Countries (2015) Downloads
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:

Ordering information: This journal article can be ordered from

DOI: 10.1515/GEJ-2014-0051

Access Statistics for this article

Global Economy Journal (GEJ) is currently edited by Joseph Pelzman

More articles in Global Economy Journal (GEJ) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().

Page updated 2023-11-07
Handle: RePEc:wsi:gejxxx:v:15:y:2015:i:02:n:gej-2014-0051