The Purchasing Power Parity Persistence Puzzle: Evidence from Black Market Real Exchange Rates

19 Pages Posted: 16 Jun 2008

See all articles by Mario Cerrato

Mario Cerrato

London Metropolitan University - Department of Economics, Finance and International Business (EFIB)

Neil Kellard

University of Essex - Essex Business School

Nicholas Sarantis

London Metropolitan University - Department of Economics, Finance and International Business (EFIB)

Abstract

In this paper we analyse the purchasing power parity (PPP) persistence puzzle using a unique data set of black market real exchange rates for 36 emerging market economies and (exact and approximate) median unbiased univariate and panel estimation methods. We construct bootstrap confidence intervals for the half-lives, as well as exact quantiles of the median function for different significance levels using Monte Carlo simulation. Even after accounting for a number of econometric issues, the PPP persistence puzzle is still a striking characteristic of the majority of emerging market countries. However, in a minority of exchange rates, the PPP puzzle is removed.

Suggested Citation

Cerrato, Mario and Kellard, Neil and Sarantis, Nicholas, The Purchasing Power Parity Persistence Puzzle: Evidence from Black Market Real Exchange Rates. Manchester School, Vol. 76, Issue 4, pp. 405-423, July 2008. Available at SSRN: https://ssrn.com/abstract=1144918 or http://dx.doi.org/10.1111/j.1467-9957.2008.01066.x

Mario Cerrato (Contact Author)

London Metropolitan University - Department of Economics, Finance and International Business (EFIB) ( email )

Economics Subject Group, LMBS
London EC2M 6SQ, EC2M 6SQ
United Kingdom

Neil Kellard

University of Essex - Essex Business School ( email )

Wivenhoe Park
Colchester CO4 3SQ
United Kingdom
+44-1206-87-4153 (Phone)

Nicholas Sarantis

London Metropolitan University - Department of Economics, Finance and International Business (EFIB) ( email )

Economics Subject Group, LMBS
London EC2M 6SQ, EC2M 6SQ
United Kingdom

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
2
Abstract Views
390
PlumX Metrics