Noman, Abdullah (2008): Testing for PPP in the Mean-Group Panel Regression Framework: Further Evidence.
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The paper investigates the validity of PPP by using 15 OECD countries data of monthly frequency from 1980:01 to 2005:12 and tests for the symmetry and proportionality hypotheses. The test for PPP is conducted in the framework of the General Relative PPP (RPPP) as proposed by Coakley et al. (2005) using the Mean-Group (MG) estimators of Pesaran and Smith (1995). We apply two variants of the MG estimators, namely MG and CMG, where the latter takes into account the problem of cross-sectional dependence (CSD). The symmetry null is unequivocally accepted for both estimators in CPI as well as PPI panels. The proportionality null, however, is rejected in the CPI panel with MG procedure but accepted with CMG. In the PPI panel, the MG estimate cannot reject the null while the CMG estimate marginally rejects it. Our findings are only partially supportive of the general RPPP.
|Item Type:||MPRA Paper|
|Original Title:||Testing for PPP in the Mean-Group Panel Regression Framework: Further Evidence|
|Keywords:||Purchasing Power Parity, Mean-Group Regression, Symmetry and Proportionality, OECD, General Relative PPP|
|Subjects:||C - Mathematical and Quantitative Methods > C2 - Single Equation Models; Single Variables > C23 - Models with Panel Data; Longitudinal Data; Spatial Time Series
F - International Economics > F3 - International Finance > F31 - Foreign Exchange
|Depositing User:||Abdullah Noman|
|Date Deposited:||19. Mar 2008 04:35|
|Last Modified:||28. Feb 2013 10:39|
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