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Purchasing power parity across Mexican cities: a panel data analysis

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  • C. O. Vargas-Tellez

Abstract

This article presents three different unit root tests for panel data, the main objective is to find the level of internal integration market through the purchasing power parity (PPP) evidence, based in the Balassa-Samuelson approach. Thus, eight kinds of markets, as tradable and nontradable goods for 16 main Mexican cities during a 21 year period have been contrasted. While two tests showed the PPP validity for seven markets, the other rejected it. The results obtained moreover feed the present controversy about which test is most appropriate to test the PPP, as soon as it is highlighted new elements emerge to explain the half-life analysis.

Suggested Citation

  • C. O. Vargas-Tellez, 2008. "Purchasing power parity across Mexican cities: a panel data analysis," Applied Economics, Taylor & Francis Journals, vol. 40(22), pages 2891-2899.
    • Handle: RePEc:taf:applec:v:40:y:2008:i:22:p:2891-2899
    DOI: 10.1080/00036840600993965
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    1. Taylor, Mark P & Peel, David A & Sarno, Lucio, 2001. "Nonlinear Mean-Reversion in Real Exchange Rates: Toward a Solution to the Purchasing Power Parity Puzzles," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(4), pages 1015-1042, November.
    2. Anindya Banerjee, 1999. "Panel Data Unit Roots and Cointegration: An Overview," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(S1), pages 607-629, November.
    3. Hakkio, Craig S., 1984. "A re-examination of purchasing power parity : A multi-country and multi-period study," Journal of International Economics, Elsevier, vol. 17(3-4), pages 265-277, November.
    4. Frankel, Jeffrey A. & Rose, Andrew K., 1996. "A panel project on purchasing power parity: Mean reversion within and between countries," Journal of International Economics, Elsevier, vol. 40(1-2), pages 209-224, February.
    5. Alan M. Taylor, 1996. "International Capital Mobility in History: Purchasing-Power Parity in the Long Run," NBER Working Papers 5742, National Bureau of Economic Research, Inc.
    6. repec:bla:obuest:v:61:y:1999:i:0:p:607-29 is not listed on IDEAS
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