Are PPP Tests Erratically Behaved? Some Panel Evidence

Guglielmo Maria Caporale and Christoph Hanck

No 2006,43, Technical Reports from Technische Universität Dortmund, Sonderforschungsbereich 475: Komplexitätsreduktion in multivariaten Datenstrukturen

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 tests for PPP. We show that if appropriate tests (which are robust to cross-sectional dependence and more powerful than single time series tests) 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.

Keywords: Purchasing Power Parity (PPP); Real Exchange Rates; Erratic Behaviour; Panel Tests (search for similar items in EconPapers)
JEL-codes: C12 C23 F31 (search for similar items in EconPapers)
Date: 2006
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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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Persistent link: https://EconPapers.repec.org/RePEc:zbw:sfb475:200643

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