Evidence on the Purchasing Power Parity in Panel of Cities

Konferenzbeitrag

The power purchasing parity (PPP) hypothesis and the law of one price (LOP) predict (long-run) price equalization across the space. In the absence of market frictions and transport costs, arbitrage should guarantee the same price, in a common currency, for a given commodity in different locations. Contradictory evidence has been reported at the international level, though generally concluding large and persistent price deviations. In this paper we show that long-run price convergence cannot be rejected in a sample of Spanish cities over a long period of time, using newly developed non-stationary panel data techniques. Robust estimates show an important dispersion of half lives in the Spanish cities. The paper also includes the analysis of the causes behind price deviations across the sample of cities.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: 43rd Congress of the European Regional Science Association: "Peripheries, Centres, and Spatial Development in the New Europe", 27th - 30th August 2003, Jyväskylä, Finland

Classification and Topics

• Classification: Wirtschaft

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): del Barrio, Tomas ; Carrion, Josep Ll ; Lopez-Bazo, Enrique
• Event: Veröffentlichung
• (who): European Regional Science Association (ERSA)
• (where): Louvain-la-Neuve
• (when): 2003

Further information

• Handle: http://hdl.handle.net/10419/116092
• Last update: 10.03.2025, 11:41 AM CET