Testing Deviations From Purchasing Power Parity (PPP) / Joshua Aizenman.

Format:

Book

Author/Creator:

Aizenman, Joshua.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w1475.

NBER working paper series no. w1475

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Testing Deviations From Purchasing Power Parity

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1984.

Summary:

The purpose of this paper is to study analytically how the presence of transportation costs in a model of deviations from PPP affects the testing procedure of the PPP hypothesis The analysis shows that in the presence of transportation costs traditional regression analysis will tend to reject the PPP hypothesis even if goods markets are well arbitraged, because the values of the regression coefficients are affected systematically by considerations that are independent of the degree to which markets are arbitraged. Thus, the content of the ppp approach cannot be tested satisfactorily without considering the systematic effects of transportation costs and other costs of goods arbitrage.

Notes:

Print version record

October 1984.