Download or read book A Panel Project on Purchasing Power Parity written by Jeffrey A. Frankel and published by . This book was released on 1995 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Previous time-series studies have shown evidence of mean- reversion in real exchange rates. Deviations from purchasing power parity (PPP) appear to have half-lives of approximately four years. However, the long samples required for statistical significance are unavailable for most currencies, and may be inappropriate because of regime changes. In this study, we re-examine deviations from PPP using a panel of 150 countries and 45 annual observations. Our panel shows strong evidence of mean-reversion that is similar to that from long time-series. PPP deviations are eroded at a rate of approximately 15% annually, i.e., their half-life is around four years. Such findings can be masked in time-series data, but are relatively easy to find in cross-sections.
Download or read book A Panel Project on Purchasing Power Parity written by Jeffrey A. Frankel and published by . This book was released on 1995 with total page 18 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Purchasing Power Parity and Real Exchange Rates written by Mark P. Taylor and published by Routledge. This book was released on 2013-09-13 with total page 227 pages. Available in PDF, EPUB and Kindle. Book excerpt: The term Purchasing Power Parity may date from the early twentieth century, when it was coined by the Swedish economist Gustav Cassel, but the underlying concept had been enjoying varying degrees of success since its development in sixteenth century Spain. Even towards the end of the twentieth century, and especially since the breakdown of the Bretton Woods system of fixed exchange rates, PPP and the stability of real exchange rates continued to be the subject of academic debate. This volume brings together essays covering aspects of current thinking on Purchasing Power Parity, from the various ways in which to test for its existence, to its appearance in different economies around the world, to examinations of the explanations given when PPP does not appear to hold This book was published as a special issue of Applied Financial Economics. The academic editor of this journal is Mark P. Taylor.
Download or read book A Panel Project on Purchasing Power Parity written by Jeffrey A. Frankel and published by . This book was released on 1995 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Purchasing Power Parity in OECD Countries written by Huseyin Kalyoncu and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the validity of purchasing power parity (PPP) for 25 OECD countries by using a panel unit-root methodology. The procedure used here is to examine stationarity of real exchange rate. Using ADF unit-root test on single time-series, it is found that real exchange rate of all OECD countries have unit root. This outcome, however, might be due to the generally low power of this test. The aim of this paper is to reconsider this issue by exploiting the extra information provided by the combination of the time-series and cross-sectional data and the subsequent power advantages of panel data unit-root tests. We apply the test advocated by Im et al. [Im, K.S., Pesaran, M.H., Shin, Y., 1997. Testing for unit roots in heterogenous panels. University of Cambridge, Department of Applied Economics]. According to estimation results real exchange rate in OECD countries are stationary and support long-run purchasing power parity.
Download or read book A Panel Project on Purchasing Power Party written by Jeffrey Alexander Frankel and published by . This book was released on 1995 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book A re examination of the Purchasing Power Parity using non stationary dynamic panel methods a comparative approach for developing and developed countries written by Imed Drine and Christophe Rault and published by . This book was released on 2003 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book How Sure are We about Purchasing Power Parity written by Biing-Shen Kuo and published by . This book was released on 2001 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Purchasing Power Parity During Currency Crises written by Jörg Breitung and published by . This book was released on 2003 with total page 17 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book PPP Strikes Back written by Mr. Haroon Mumtaz and published by International Monetary Fund. This book was released on 2003-04-01 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: We show the importance of a dynamic aggregation bias in accounting for the PPP puzzle. We prove that established time-series and panel methods substantially exaggerate the persistence of real exchange rates because of heterogeneity in the dynamics of disaggregated relative prices. When heterogeneity is properly taken into account, estimates of the real exchange rate half-life fall dramatically, to little more than one year, or significantly below Rogoff''s "consensus view" of three to five years. We show that corrected estimates are consistent with plausible nominal rigidities, thus, arguably, solving the PPP puzzle.
Download or read book Purchasing Power Parity written by Matthew Higgins and published by . This book was released on 2006 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: A recent influential paper (O'Connell 1998) argues that panel data evidence in favor of purchasing power parity disappears once test procedures are altered to accommodate heterogenous cross-sectional dependence among real exchange rate innovations. We present evidence to the contrary. First, we modify two extant panel unit root panel unit root tests to eliminate the upward size distortion induced by contemporaneous cross-sectional dependence. Second, we exploit a recently-introduced test, based on SUR techniques, that also remains valid in the presence of cross-sectional dependence. Using the three new tests, we find overwhelming evidence in favor of real exchange rate stationarity during the post-Bretton Woods era among OECD economies, as well as among a larger group of quot;openquot; economies. We also find emphatic evidence of stationarity using O'Connell's GLS test. Bias-corrected parameter estimates indicate that deviations from PPP erode more quickly for real exchange rates defined using wholesale rather than consumer price indices. Monte Carlo experiments indicate that several of the tests discussed here have considerable power against the unit root null.
Download or read book The Principle Practise and Problems of Purchasing Power Parity Theory written by Alina Ignatiuk and published by GRIN Verlag. This book was released on 2009-04 with total page 69 pages. Available in PDF, EPUB and Kindle. Book excerpt: Seminar paper from the year 2008 in the subject Business economics - Miscellaneous, grade: A, Schmalkalden University of Applied Sciences (Schmalkalden University), language: English, abstract: "Under the skin of any international economist lies a deep-seated belief in some variant of the PPP theory of the exchange rate." The purpose of this paper is to consider one of the most controversial theory in international economics - Purchasing Power Parity theory - its main idea, empirical evidence, limitations and practical application. The main idea of PPP is price levels changes determine the exchange rate change between two countries. There are two versions of PPP theory absolute and relative. Stricter absolute version of PPP did not find confirmation in reality and relative version of PPP theory was proposed. Despite theoretical and practical inconformity, PPP is present in many models of international economics as an explanation of exchange rate changes. The main apologist of PPP theory and its father was Gustav Cassel. He indicated that the exchange rate determined by price levels is not necessarily the actual exchange rate but the equilibrium one. Also Cassel mentioned that there is a tendency for the actual exchange rate to return to its equilibrium exchange rate. The original idea of PPP theory is described below: "Our willingness to pay a certain price for foreign money must ultimately and essentially be due to the fact that this money possesses a purchasing power as against commodities and services in that foreign country." In this paper we considered the principle and two versions of PPP theory, discussed its empirical evidence and econometrical tests, and also tried to find possible reasons why PPP theory fails in reality and answered the question is this theory still useful for explaining exchange rates movements.
Download or read book How Sure are We about Purchasing Power Parity written by Biing-Shen Kuo and published by . This book was released on 2001 with total page 23 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Purchasing Power Parity Criterion for Stabilizing Exchange Rates written by International Monetary Fund and published by International Monetary Fund. This book was released on 1989-06-21 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: The use of purchasing power parity as a basis of fixing exchange rates among industrial countries, as proposed by McKinnon, is discussed and contrasted with alternative interpretations of the PPP doctrine. Major policy implications of such a regime are emphasized. Furthermore, a new technique for estimating PPP exchange rates which makes use of price pressure exerted by exchange deviation is introduced. This method is capable of solving the “base-year” problem more satisfactorily than the traditional Cassel-Keynes methodology. Estimated yen/dollar and mark/dollar PPP exchange rates are close to estimates derived using other methods.
Download or read book Purchasing Power Parity in the European Union written by Cornelia Neumann and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This bachelorthesis investigates whether purchasing power parity holds better among EU members than in the usual samples of major industrialized countries. European real exchange rates against the German mark / the euro are tested for unit roots using the Levin, Lin and Chu test. Results show evidence of stationary real exchange rates similar to results reported in the literature. The unit root hypothesis can be rejected at the five percent level for a panel of twelve European countries from 1979 to 2006. From 1999 to 2006, the unit root hypothesis can be rejected at the one percent level for the EU 25 and the EU 15, and at the five percent level for a panel of the ten countries joining the EU in 2004. The half-life of deviations from parity is estimated to be three and a half years from 1979 to 2006 and two and a half years from 1999 to 2006.
Download or read book Why Panel Tests of Purchasing Power Parity Should Allow for Heterogeneous Mean Reversion written by Kees C. G. Koedijk and published by . This book was released on 2011 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Recent studies of purchasing power parity (PPP) use panel tests that fail to take into account heterogeneity in the speed of mean reversion across real exchange rates. In contrast to several other severe restrictions of panel models and tests of PPP, the assumption of homogeneous mean reversion is still widely used and its consequences are virtually unexplored. This paper analyzes the properties of homogeneous and heterogeneous panel unit root testing methodologies. Using Monte Carlo simulation, we uncover important adverse properties of the panel approach that relies on homogeneous estimation and testing. More specifically, power functions are low and assume irregular shapes. Furthermore, homogeneous estimates of the mean reversion parameters exhibit potentially large biases. These properties can lead to misleading inferences on the validity of PPP. Our findings highlight the importance of allowing for heterogeneous estimation when testing for a unit root in panels of real exchange rates.
Download or read book A Century of Purchasing power Parity written by Alan M. Taylor and published by . This book was released on 2000 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates purchasing-power parity (PPP) since the late nineteenth century. I collected data for a group of twenty countries over one hundred years, a larger historical panel of annual data than has ever been studied before. The evidence for long-run PPP is favorable using recent multivariate and univariate tests of higher power. Residual variance analysis shows that episodes of floating exchange rates have generally been associated with larger deviations from PPP, as expected; this result is not attributable to significantly greater persistence (longer halflives) of deviations in such regimes, but is due to the larger shocks to the real-exchange rate process in such episodes. In the course of the twentieth century there was relatively little change in the capacity of international market integration to smooth out real exchange rate shocks. Instead, changes in the size of shocks depended on the political economy of monetary and exchange-rate regime choice under the constraints imposed by the trilemma.
