Purchasing Power Parity - Evidence from a New Panel Test
17 Pages Posted: 5 Nov 2000
Date Written: September 2000
The paper uses a recently suggested test for unit roots in panels of time series data (Maddala and Wu, 1999) to consider the Purchasing Power Parity Hypothesis. The major innovation of this test is that it allows both the testing of the unit root null, using the ADF test, and the stationarity null, using the KPSS test. We find that the the results are inconsistent, suggesting that either alternatives to a unit root null hypothesis may need to be considered or that panel based testing in this particular context may be of limited value.
Keywords: PPP, panel tests, fisher probabilities
JEL Classification: C23, F31
Suggested Citation: Suggested Citation