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Deviations from Purchasing Power Parity: Any Role for the Harrod-Balassa-Samuelson Hypothesis?

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  • Manuela Nenna

    (Ministero dell’Economia e delle Finanze, Roma
    Università «La Sapienza», Roma)

Abstract

The aim of this paper is to explain relative prices divergences among cities within the same currency area, such as Italy. According to our results, we find relative prices mean reverting, but at a very slow rate. The measure of persistence is high also in a well-established “monetary union” such as Italy, where some of the standard reasons behind deviations from the parity are minimised or negligible. In this work, we suggest two main explanations. First, arbitrage impediments due to transportation costs, account for part of this divergence. Second, the Harrod-Balassa-Samuelson effect is also found to be partially responsible for such persistence.

Suggested Citation

  • Manuela Nenna, 2002. "Deviations from Purchasing Power Parity: Any Role for the Harrod-Balassa-Samuelson Hypothesis?," Rivista di Politica Economica, SIPI Spa, vol. 92(4), pages 167-196, July-Augu.
    • Handle: RePEc:rpo:ripoec:v:92:y:2002:i:4:p:167-196
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    Cited by:

    1. Nicola Amendola & Giovanni Vecchi & Bilal Al Kiswani, 2009. "Il costo della vita al Nord e al Sud d’Italia, dal dopoguerra a oggi. Stime di prima generazione," Rivista di Politica Economica, SIPI Spa, vol. 99(2), pages 3-34, April-Jun.

    More about this item

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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