Purchasing Power Parity - Evidence from a New Panel Test

Posted: 10 Sep 2002

See all articles by Garry MacDonald

Garry MacDonald

Curtin University - School of Economics and Finance

David E. Allen

School of Mathematics and Statistics, The University of Sydney; Financial Research Network (FIRN); Department of Finance; School of Business and Law, Edith Cowan University

Stuart N. Cruickshank

School of Finance and Business Economics

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Abstract

This 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 unit root null, using the ADF test, and the stationarity null, using the KPSS test. We find that the results are inconsistent, suggesting that either alternative hypotheses to a unit root may need to be considered or that panel based testing in this particular context may be of limited value.

Keywords: Panel unit root tests, purchasing power parity

JEL Classification: C23, F31

Suggested Citation

MacDonald, Garry and Allen, David Edmund and Cruickshank, Stuart N., Purchasing Power Parity - Evidence from a New Panel Test. Applied Economics, Vol. 34, No. 11, July 20, 2002. Available at SSRN: https://ssrn.com/abstract=326221

Garry MacDonald

Curtin University - School of Economics and Finance ( email )

GPO Box U 1987
Perth, Western Australia 6845
Australia
+61 892267724 (Phone)

David Edmund Allen (Contact Author)

School of Mathematics and Statistics, The University of Sydney ( email )

School of Mathematics and Statistics F07
University of Sydney
Sydney, New South Wales 2006
Australia

HOME PAGE: http://www.maths.usyd.edu.au

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Department of Finance ( email )

Taiwan
Taiwan

School of Business and Law, Edith Cowan University

100 Joondalup Drive
Joondalup, WA 6027
Australia

HOME PAGE: http://www.dallenwapty.com

Stuart N. Cruickshank

School of Finance and Business Economics ( email )

100 Joondalup Drive
Joondalup, WA 6027
Australia

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