Purchasing Power Parity for Developing and Developed Countries: What Can We Learn from Non-Stationary Panel Data Models?

Imed Drine () and Christophe Rault

No 2887, IZA Discussion Papers from Institute of Labor Economics (IZA)

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: panel unit-root and cointegration tests; developing country; developed country; real exchange rate; purchasing power parity (search for similar items in EconPapers)
JEL-codes: C15 E31 F0 F31 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2007-06
New Economics Papers: this item is included in nep-cba, nep-ifn and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Published - published in: Journal of Economic Surveys, 2008, 22 (4), 752-773

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https://docs.iza.org/dp2887.pdf (application/pdf)

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 (2008)
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