Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/34229 
Year of Publication: 
2007
Series/Report no.: 
IZA Discussion Papers No. 2887
Publisher: 
Institute for the Study of Labor (IZA), Bonn
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.
Document Type: 
Working Paper

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