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Revisiting Purchasing Power Parity in OECD

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  • Chun Jiang
  • Mohsen Bahmani-Oskooee
  • Tsangyao Chang

Abstract

This study revisits Purchasing Power Parity theory (PPP) in the 34 OECD countries during January 1994-August 2013. We use a new panel stationary test with both sharp breaks and smooth shifts, a novel approach to panel unit-root testing, proposed by Bahmani-Oskooee et al . (2014). The results indicate that the PPP holds in half of the 34 OECD countries. These results indicate the importance of proper modelling of both sharp breaks and smooth shifts in real effective exchange rate series of OECD countries.

Suggested Citation

  • Chun Jiang & Mohsen Bahmani-Oskooee & Tsangyao Chang, 2015. "Revisiting Purchasing Power Parity in OECD," Applied Economics, Taylor & Francis Journals, vol. 47(40), pages 4323-4334, August.
    • Handle: RePEc:taf:applec:v:47:y:2015:i:40:p:4323-4334
    DOI: 10.1080/00036846.2015.1026592
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    Cited by:

    1. Kai-Hua WANG & Chi-Wei SU & Hsu-Ling CHANG & Ji MA & Cristina IOVU, 2017. "Purchasing Power Parity In China: An Empirical Investigation Based On Bootstrap Rollingwindow Test," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 166-181, December.
    2. Niri Martha Choji* & Siok Kun Sek, 2018. "Investigating the PPP Theory and Long-run Estimates for Five Asian Countries," The Journal of Social Sciences Research, Academic Research Publishing Group, pages 237-242:2.
    3. Xie, Zixiong & Chen, Shyh-Wei & Hsieh, Chun-Kuei, 2021. "Facing up to the polysemy of purchasing power parity: New international evidence," Economic Modelling, Elsevier, vol. 98(C), pages 247-265.
    4. Mohsen Bahmani-Oskooee & Omid Ranjbar, 2016. "Quantile unit root test and PPP: evidence from 23 OECD countries," Applied Economics, Taylor & Francis Journals, vol. 48(31), pages 2899-2911, July.
    5. Yoon, Jong Cheol & Min, Dai Hong & Jei, Sang Young, 2019. "Empirical test of purchasing power parity using a time-varying cointegration model for China and the UK," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 521(C), pages 41-47.
    6. Stewart, Chris, 2023. "Re-evaluating whether absolute or relative purchasing power parity is being tested when using price indices," Economics Discussion Papers 2023-1, School of Economics, Kingston University London.

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