Are PPP Tests Erratically Behaved? Some Panel Evidence

Guglielmo Maria Caporale and Christoph Hanck

Economics and Finance Discussion Papers from Economics and Finance Section, School of Social Sciences, Brunel University

Abstract: This paper examines whether, in addition to standard unit root and cointegration tests,panel approaches also produce test statistics behaving erratically when applied to PPP. We show that if appropriate tests (which are robust to cross-sectional dependence and more powerful) are used, any evidence of erratic behaviour disappears, and strong empirical support is found for PPP. It appears therefore that recent advances in panel data econometrics might enable us to settle the PPP debate.

Pages: 10 pages
Date: 2006-10
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Related works:
Journal Article: Are PPP tests erratically behaved? Some panel evidence (2010)
Working Paper: Are PPP Tests Erratically Behaved? Some Panel Evidence (2006)
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