PPP, UCIP and Constant Real Rate of Return: A Panel Data Approach

LOPCU K.

ERC-ODTÜ Uluslararası Ekonomi Kongresi-III, Ankara, Turkey, 8 - 11 September 1999, pp.1-22

  • Publication Type: Conference Paper / Full Text
  • City: Ankara
  • Country: Turkey
  • Page Numbers: pp.1-22
  • Çukurova University Affiliated: No

Abstract

This paper investigates several important parities in international finance, including both the
absolute and the relative versions of PPP and UCIP. Redefining these parities as transitory
deviations from the long-run or steady state equilibrium conditions, I test the validity of these
hypotheses by investigating the existence of unit roots in data from a panel of OECD countries.
The findings support that all these parities hold in the long run, although adjustment might be
slow.

JEL Classification: C22; C23; F31

Key words: PPP; UCIP; Panel Data; Unit Root