Purchasing Power Parity - Evidence from a New Panel Test
Posted: 10 Sep 2002
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: Suggested Citation