Over the past decade, the purchasing-power parity (PPP) puzzle has taken two forms. Its early form arose from early tests of unit roots in real exchange rates, which failed to reject the null hypothesis, thus casting doubts on the long-term PPP hypothesis of real exchange rates ' mean

We examine properties of residual-based tests for the null of no cointegration for dynamic panels in which both the short-run dynamics and the long-run slope coefficients are permitted to be heterogeneous across individual members of the panel+ The tests also allow for individual heterogeneous fixed effects and trend terms, and we consider both pooled within dimension tests and group mean between dimension tests+ We derive limiting distributions for these and show that they are normal and free of nuisance parameters+ We also provide Monte Carlo evidence to demonstrate their small sample size and power performance, and we illustrate their use in testing purchasing power parity for the post–Bretton Woods period+ 1.

This paper examines the PPP hypothesis in a number of Sub-Saharan countries by testing the order of integration in the log of their real exchange rate vis-à-vis the US dollar. I(d) techniques based on both asymptotic and finite sample results are used. The test results lead to the rejection of PPP

This paper uses a decomposition of the data into common and idiosyncratic components to develop procedures that test if these components satisfy the null hypothesis of stationarity.

This paper tests for PPP in a group of seventeen Latin American (LA) countries by applying fractional integration techniques to real exchange rate series. Compared to earlier studies on these economies, this approach has the advantage of allowing for non-integer values for the degree of integration

This study contributes to the existing literature by examining the validity of PPP hypothesis for Cambodia. The standard unit root tests (ADF and PP) and the panel unit root tests fail to support PPP hypothesis for the nine Cambodia’s trading partners. The unit root tests with structural break

size distortions, if the model under the null hypothesis is highly persistent. This fact calls into question the use of these tests in empirical work. We illustrate the practical importance of this point for tests of long-run purchasing power parity (PPP) under the recent float. We show that the common

of the purchasing power parity (PPP) hypothesis. Following Elliott (1998), we show that if the exchange rate and relative price series contain near-to-unit roots in the context of a bivariate system, then any inference on the “cointegrating ” vector and consequently on PPP, which is based on standard cointegration

A common …nding in the empirical literature on the validity of purchasing power parity (PPP) is that it holds when tested for in panel data, but not in univariate (i.e. country speci…c) analysis. The usual explanation for this mismatch is that panel tests for unit roots and cointegration are more

The long-run purchasing power parity (PPP) hypothesis is re-examined for Turkey by using the black market and official exchange rate through standard (ADF, PP) newer and more powerful tests (KPSS, DF-GLS) for the period 1969M1- 1998 M12. Over all result implies all unit root test support PPP