Lee, Chin (2010): Purchasing power parity and free trade area. Published in: The Empirical Economics Letters , Vol. 9, No. 10 (2010): pp. 1003-1008.
Download (44kB) | Preview
The aim of this paper is to apply recently developed panel cointegration techniques proposed by Pedroni (1999, 2004) to evaluate the effectiveness of various regional trade agreements by examine the goods market integration between trading partners using purchasing power parity (PPP). The results obtained from panel cointegration tests strongly support the validity of long-run PPP in almost all cases. Evidence of price convergence suggested that the panel countries of free trade areas (FTAs) are integrated, hence FTAs has fostererd the price convergence.
|Item Type:||MPRA Paper|
|Original Title:||Purchasing power parity and free trade area|
|Keywords:||purchasing power parity, economic integration, free trade area, panel cointegration test|
|Subjects:||F - International Economics > F1 - Trade > F15 - Economic Integration
E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level ; Inflation ; Deflation
F - International Economics > F3 - International Finance > F31 - Foreign Exchange
|Depositing User:||Chin Lee|
|Date Deposited:||02 Aug 2012 12:52|
|Last Modified:||02 Nov 2016 08:55|
Aggarwal, R. and Simmons, W., 2006,. Eonomic Iintegration among Caribbean Countries: Evidence from Purchasing Power Parity, 1980–2000, Journal of Policy Modeling, 28, 277–280.
Cheung, Y.W., Chinn, M.D., Fujii, E., 2006, The Chinese Economies in Global Context: The Integration Process and Its Determinants, Journal of the Japanese and International Economies, 20, 128–153.
Cheung, Y.W., Chinn, M.D., Fujii, E., 2003, China, Hong Kong, and Taiwan: A Quantitative Assessment of Real and Financial Integration, China Economic Review 14, 281– 303.
Chinn, M.D., 1999, Real and Financial Linkages and Asia-Pacific Exchange Rates, in Asia-Pacific Economic Linkages (eds. Shigeyuki Abe, Mordechai E. Kreinin and Michael G. Plummer), NY: Elsevier/Pergamon Press. http://www.nber.org/vitae/vita614.pdf
Hummels, D. and Skiba, A., 2004, A Virtuous Cycle? Regional Tariff Liberalization and Scale Economies in Transport, in FTAA and Beyond: Prospects for Integration in the America. (eds. Estevadeordal, A., D. Rodrik, A. M. Taylor, and A. Velasco), Cambridge: Harvard University Press.
Koedijk, K.G.; Tims, B. and Dijk, M.A., 2004, Purchasing Power Parity and the Euro Area, Journal of International Money and Finance, 23, 1081–1107.
Laurenceson, J., 2003, Economic Integration between China and the ASEAN-5, ASEAN Economic Bulletin, 20, 103-111.
Laureti, L., 2001, Purchasing Power Parity and Integration: Empirical Evidence in the Mediterranean Countries, Journal of Policy Modeling, 23, 731-751.
Moodley, R.D.; Kerr, W.A. and Gordon, D.V., 2000, Has the Canada-US Trade Agreement Fostered Price Integration? Review of World Economics, 136, 334-354.
Moosa, I.A. and Bhatti, R.H., 1997, Are Asian Markets Integrated? Evidence for Six Countries vis-à-vis Japan, International Economic Journal, 111, 51-67.
Pedroni P., 1999, Critical Values for Cointegrating Tests in Heterogeneous Panels with Multiple Regressors, Oxford Bulletin of Economics and Statistics, 61, 653-670.
Pedroni, P., 2004, Panel Cointegration; Asymptotic and Finite Sample Properties of Pooled Time Series Tests with an Application to the Purchasing Power Parity Hypothesis, Econometric Theory, 20, 597-625.