Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/26300 
Year of Publication: 
2008
Series/Report no.: 
CESifo Working Paper No. 2255
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
The aim of this paper is to apply recently developed panel cointegration techniques proposed by Pedroni (1999, 2004) and generalized by Banerjee and Carrion-i-Silvestre (2006) to examine the robustness of the PPP concept for a sample of 80 developed and developing countries. We find that strong PPP is verified for OECD countries and weak PPP for MENA countries. However in African, Asian, Latin American and Central and Eastern European countries, PPP does not seem relevant to characterize the long-run behavior of the real exchange rate. Further investigations indicate that the nature of the exchange rate regime doesn't condition the validity of PPP which is more easily accepted in countries with high than low inflation.
Subjects: 
purchasing power parity
real exchange rate
developed country
developing country
panel unit-root and cointegration tests
JEL: 
E31
F0
F31
C15
Document Type: 
Working Paper
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