The Behaviour of Relative Prices in the European Union: A Sectoral Analysis

Natalie Chen

No 3320, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Using multivariate unit root test methods, this Paper investigates the Purchasing Power Parity (PPP) hypothesis at the sectoral level across six European countries over the last seventeen years. Evidence of mean reversion toward PPP is found for the relative prices of some sectors and countries. Mean reversion in relative prices is explained by cross-country and cross-sectoral characteristics such as the distance between countries, nominal exchange rate volatility, differences in GDP per capita, non-tariff barriers, research and development, advertising, industrial concentration and tradability of the products.

Keywords: Ppp; Loop; Multivariate unit root tests; Persistence; Mean reversion (search for similar items in EconPapers)
JEL-codes: C23 F31 F41 (search for similar items in EconPapers)
Date: 2002-04
New Economics Papers: this item is included in nep-eec and nep-ifn
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Citations: View citations in EconPapers (8)

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Journal Article: The behaviour of relative prices in the European Union: A sectoral analysis (2004)
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