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- Title
THE PURCHASING POWER PARITY PERSISTENCE PUZZLE: EVIDENCE FROM BLACK MARKET REAL EXCHANGE RATES.
- Authors
CERRATO, MARIO; KELLARD, NEIL; SARANTIS, NICHOLAS
- Abstract
In this paper we analyse the purchasing power parity (PPP) persistence puzzle using a unique data set of black market real exchange rates for 36 emerging market economies and (exact and approximate) median unbiased univariate and panel estimation methods. We construct bootstrap confidence intervals for the half-lives, as well as exact quantiles of the median function for different significance levels using Monte Carlo simulation. Even after accounting for a number of econometric issues, the PPP persistence puzzle is still a striking characteristic of the majority of emerging market countries. However, in a minority of exchange rates, the PPP puzzle is removed.
- Subjects
PURCHASING power parity; PURCHASING power; BLACK market; FOREIGN exchange rates; CAPITALISM; ESTIMATION theory; STATISTICAL bootstrapping; MONTE Carlo method; STATISTICAL sampling
- Publication
Manchester School (1463-6786), 2008, Vol 76, Issue 4, p405
- ISSN
1463-6786
- Publication type
Article
- DOI
10.1111/j.1467-9957.2008.01066.x