Arbeitspapier

Testing for Purchasing Power Parity in Cointegrated Panels

This paper applies the recently developed maximum-likelihood-panel cointegration method of Larsson and Lyhagen (2007) to test the strong PPP hypothesis during the recent ‡oat period on data for the G7 countries. This method is robust in several important dimensions relative to previous methods, including the well-known issue of cross-sectional dependence of error terms. The findings using this new method are contrasted to those from the Pedroni (1995) cointegration tests and fully modified OLS and dynamic OLS estimators of the cointegrating vectors. Although the shortcomings of previous methods do matter in various cases, the overall results are the same across approaches: The strong PPP hypothesis is forcefully rejected in favor of the weak PPP hypothesis with heterogeneous cointegrating vectors. As a consequence, the strong PPP hypothesis does not even seem to be an acceptable approximation of observed data.

Sprache
Englisch

Erschienen in
Series: Working Paper ; No. 2008:1

Klassifikation
Wirtschaft
Multiple or Simultaneous Equation Models: Panel Data Models; Spatio-temporal Models
Foreign Exchange
Thema
Purchasing Power Parity
Panel Cointegration
Maximum Likelihood
Fully Modified OLS
Dynamic OLS
Kaufkraftparität
Panel
Kointegration
Maximum-Likelihood-Methode
G-7-Staaten

Ereignis
Geistige Schöpfung
(wer)
Carlsson, Mikael
Lyhagen, Johan
Österholm, Pär
Ereignis
Veröffentlichung
(wer)
Uppsala University, Department of Economics
(wo)
Uppsala
(wann)
2007

Handle
URN
urn:nbn:se:uu:diva-210627
Letzte Aktualisierung
10.03.2025, 11:42 MEZ

Datenpartner

Dieses Objekt wird bereitgestellt von:
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Objekttyp

  • Arbeitspapier

Beteiligte

  • Carlsson, Mikael
  • Lyhagen, Johan
  • Österholm, Pär
  • Uppsala University, Department of Economics

Entstanden

  • 2007

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