Purchasing Power Parity for Developing and Developed Countries. What can we Learn from Non-Stationary Panel Data Models?

Imed Drine () and Christophe Rault

No 2255, CESifo Working Paper Series from CESifo

Abstract: The aim of this paper is to apply recently developed panel cointegration techniques proposed by Pedroni (1999, 2004) and generalized by Banerjee and Carrion-i-Silvestre (2006) to examine the robustness of the PPP concept for a sample of 80 developed and developing countries. We find that strong PPP is verified for OECD countries and weak PPP for MENA countries. However in African, Asian, Latin American and Central and Eastern European countries, PPP does not seem relevant to characterize the long-run behavior of the real exchange rate. Further investigations indicate that the nature of the exchange rate regime doesn’t condition the validity of PPP which is more easily accepted in countries with high than low inflation.

Keywords: purchasing power parity; real exchange rate; developed country; developing country; panel unit-root and cointegration tests (search for similar items in EconPapers)
JEL-codes: C15 E31 F00 F31 (search for similar items in EconPapers)
Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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Related works:
Journal Article: PURCHASING POWER PARITY FOR DEVELOPING AND DEVELOPED COUNTRIES. WHAT CAN WE LEARN FROM NON‐STATIONARY PANEL DATA MODELS? (2008)
Working Paper: Purchasing Power Parity for developing and developed countries. What can we learn from non-stationary panel data models? (2008)
Working Paper: Purchasing Power Parity for Developing and Developed Countries: What can we learn from Non-Stationary Panel Data Models (2008)
Working Paper: Purchasing Power Parity for Developing and Developed Countries: What can we learn from Non-Stationary Panel Data Models (2008)
Working Paper: Purchasing Power Parity for Developing and Developed Countries: What Can We Learn from Non-Stationary Panel Data Models? (2007)
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