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Cities, Borders, Distances, Non-traded Goods and Purchasing Power Parity

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  • Jenkins, Michael A

Abstract

Most empirical studies for the post Bretton Woods period fail to find evidence of a long-run Purchasing Power Parity (PPP) relationship. An investigation into the failure of PPP is made in this study by using disaggregated price data. This disaggregation is on two levels: location (prices from US and Canadian cities rather than national aggregates) and type of goods (e.g., fuel oil, a tradable commodity and local public transportation, a non-tradable). This disaggregation allows for the testing of the importance of borders (implying an exchange rate), distances, and types of goods in the failure of PPP. The analysis conducted suggests that both country borders and distances play a significant role. However, there is mixed evidence concerning type of goods as an important determinant of the failure of PPP. Copyright 1997 by Blackwell Publishing Ltd

Suggested Citation

  • Jenkins, Michael A, 1997. "Cities, Borders, Distances, Non-traded Goods and Purchasing Power Parity," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 59(2), pages 203-213, May.
    • Handle: RePEc:bla:obuest:v:59:y:1997:i:2:p:203-13
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    Cited by:

    1. Josep LluIs Carrion-I-Silvestre & Tomas Del Barrio & Enrique Lopez-Bazo, 2004. "Evidence on the purchasing power parity in a panel of cities," Applied Economics, Taylor & Francis Journals, vol. 36(9), pages 961-966.
    2. Fullerton Jr., Thomas M. & Fierro, Karen P. & Villalobos, Emmanuel, 2009. "Cross-border restaurant price and exchange rate interactions," The North American Journal of Economics and Finance, Elsevier, vol. 20(3), pages 281-288, December.
    3. Lee, Chin & Habibullah, Muzafar Shah, 2008. "Price convergence and market integration: evidence from Malaysia," MPRA Paper 40408, University Library of Munich, Germany.
    4. Michael Jenkins, 2004. "Purchasing power parity and the role of traded goods: evidence from EU states," Applied Economics, Taylor & Francis Journals, vol. 36(12), pages 1371-1375.
    5. Mohsen Bahmani‐Oskooee & Scott W. Hegerty, 2009. "Purchasing Power Parity In Less‐Developed And Transition Economies: A Review Paper," Journal of Economic Surveys, Wiley Blackwell, vol. 23(4), pages 617-658, September.
    6. Y. Oh & K. Han, 2009. "Purchasing power parity in Korean city panels with disaggregate price indices," Applied Economics Letters, Taylor & Francis Journals, vol. 16(1), pages 45-49.
    7. Esaka, Taro, 2003. "Panel unit root tests of purchasing power parity between Japanese cities, 1960-1998: disaggregated price data," Japan and the World Economy, Elsevier, vol. 15(2), pages 233-244, April.
    8. Lee, Chin, 2015. "Is There Any Regional Price Disparity in Peninsular Malaysia?," MPRA Paper 70592, University Library of Munich, Germany.
    9. Blanco-Gonzalez, Lorenzo & Fullerton, Thomas Jr., 2006. "Borderplex menu evidence for the law of one price," Economics Letters, Elsevier, vol. 90(1), pages 28-33, January.
    10. Hisham Foad, 2010. "Europe Without Borders? The Effect of the Euro on Price Convergence," International Regional Science Review, , vol. 33(1), pages 86-111, January.
    11. Choi, Chi-Young & Matsubara, Kiyoshi, 2007. "Heterogeneity in the persistence of relative prices: What do the Japanese cities tell us?," Journal of the Japanese and International Economies, Elsevier, vol. 21(2), pages 260-286, June.
    12. Jenkins, Michael A. & Snaith, Sean M., 2005. "Tests of Purchasing Power Parity via cointegration analysis of heterogeneous panels with consumer price indices," Journal of Macroeconomics, Elsevier, vol. 27(2), pages 345-362, June.
    13. Escribano, A. & Franses, Ph.H.B.F. & van Dijk, D.J.C., 1998. "Nonlinearities and outliers: robust specification of STAR models," Econometric Institute Research Papers EI 9832, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
    14. Thomas Fullerton & Osvaldo Miranda, 2009. "Borderplex brand name medicine price differences," Applied Economics, Taylor & Francis Journals, vol. 43(8), pages 929-939.
    15. Thomas M. Fullerton & Roberto Coronado, 2001. "Restaurant Prices and the Mexican Peso," Southern Economic Journal, John Wiley & Sons, vol. 68(1), pages 145-155, July.
    16. Blanco-Gonzalez, Lorenzo & Fullerton, Thomas M., Jr., 2008. "La Ley del Precio Unitario en la Zona Metropolitana Fronteriza [The Law of One Price in the Borderplex]," MPRA Paper 14687, University Library of Munich, Germany.

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