"Aggregation Bias" DOES Explain the PPP Puzzle / Jean Imbs, Haroon Mumtaz, Morten O. Ravn, Hélène Rey.

Format:

Book

Author/Creator:

Imbs, Jean.

Contributor:

National Bureau of Economic Research.

Mumtaz, Haroon.

Ravn, Morten O.

Rey, Hélène.

Series:

Working Paper Series (National Bureau of Economic Research) no. w11607.

NBER working paper series no. w11607

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2005.

Summary:

This article summarizes our views on the role of an "aggregation bias" in explaining the PPP Puzzle, in response to the several papers recently written in reaction to our initial contribution. We discuss in particular the criticisms of Imbs, Mumtaz, Ravn and Rey (2002) presented in Chen and Engel (2005). We show that their contentions are based on: (i) analytical counter-examples which are not empirically relevant; (ii) simulation results minimizing the extent of "aggregation bias"; (iii) unfounded claims on the impact of measurement errors on our results; and (iv) problematic implementation of small-sample bias corrections. We conclude, as in our original paper, that "aggregation bias" goes a long way towards explaining the PPP puzzle.

Notes:

Print version record

September 2005.