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A Century of Purchasing Power Parity: Further Evidence

Author

Listed:
  • Mohsen Bahmani-Oskooee

    (University of Wisconsin-Milwaukee)

  • Su Zhou

    (University of Texas at San Antonio)

  • Ali Kutan

    (Southern Illinois University-Edwardsville)

Abstract

Since the publication of Taylor's (2002) results supporting Purchasing Power Parity (PPP) theory using a century of data, several authors have tried to verify PPP using the same data set. While one study has rejected Taylor''s strong conclusion, others have supported it. In this paper we use yet a different unit root testing procedure to determine whether Taylor''s results are sensitive to switching the null hypothesis of stationarity with the alternative of non-stationarity. More precisely, we rely upon Kwiatkowski, et al. (1992) test and apply it to the real bilateral and real effective exchange rates of 20 countries in Taylor''s sample. The results provide support for PPP in 18 of the 20 countries that are much closer to Taylor''s findings than any other study.

Suggested Citation

  • Mohsen Bahmani-Oskooee & Su Zhou & Ali Kutan, 2007. "A Century of Purchasing Power Parity: Further Evidence," Economics Bulletin, AccessEcon, vol. 6(31), pages 1-9.
    • Handle: RePEc:ebl:ecbull:eb-07f30005
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    References listed on IDEAS

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    Cited by:

    1. Wallace, Frederick & Lozano Cortés, René & Cabrera-Castellanos, Luis F., 2008. "Pruebas de cointegración de paridad de poder adquisitivo [Cointegration Tests of Purchasing Power Parity]," MPRA Paper 10011, University Library of Munich, Germany.
    2. Frederick Wallace, 2013. "Cointegration tests of purchasing power parity," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 149(4), pages 779-802, December.
    3. Njindan Iyke , Bernard & Odhiambo, Nicholas M., 2015. "A re-examination of long-run Purchasing Power Parity (PPP) hypothesis: the case of two Southern African countries," Working Papers 18980, University of South Africa, Department of Economics.
    4. Njindan Iyke, Bernard, 2015. "Real Exchange Rates Persistence in the West African Monetary Zone: A Revisit of the PPP Puzzle," MPRA Paper 67282, University Library of Munich, Germany.
    5. Frederick H. Wallace, 2017. "Purchasing power parity in Mexico since 1933," Latin American Economic Review, Springer;Centro de Investigaciòn y Docencia Económica (CIDE), vol. 26(1), pages 1-18, December.

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    JEL classification:

    • F3 - International Economics - - International Finance
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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