Journal
REVIEW OF ECONOMICS AND STATISTICS
Volume 83, Issue 4, Pages 727-731Publisher
M I T PRESS
DOI: 10.1162/003465301753237803
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This paper employs recently developed techniques for testing hypotheses in cointegrated panels to test the strong version of purchasing power parity for a panel of post Bretton Woods data. We compare results using fully modified and dynamic OLS approaches, and strongly reject the hypothesis. We also introduce a new between-dimension dynamic OLS estimator and find that the between-dimension FMOLS and DOLS estimates of the long-run deviation from purchasing power parity are ger than the corresponding within-dimension estimates. Finally, we attempt to reconcile these rejections with the mixed findings that have been reported in panel unit root studies.
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