Journal article
Purchasing Power Parity and aggregation bias for a developing country: The case of Mexico
Journal of development economics, Vol.90(2), pp.237-243
11/01/2009
DOI: 10.1016/j.jdeveco.2008.11.009
Abstract
This paper investigates long-run Purchasing Power Parity (PPP) between the US and Mexico. We use a panel of disaggregated price data between the US and Mexico with a long time series to look at two types of aggregation bias. The first is examined in Imbs et al. — which we refer to as estimator aggregation bias — and the second is put forth by Broda and Weinstein — hereafter, data aggregation bias. The findings indicate substantial estimator aggregation bias and data aggregation bias. Although estimates using aggregate data and imposing homogeneous coefficients provide little evidence of PPP, findings with disaggregated data and heterogeneous coefficient estimators offer strong support. The results also suggest the presence of small-sample bias as examined in Chen and Engel, but with little effect on the qualitative results. Tradable goods and non-tradable goods show little distinction in convergence rates. Estimated half-lives are lower under flexible than fixed exchange rates and indicate rapid convergence during the Mexican peso crisis.
Details
- Title: Subtitle
- Purchasing Power Parity and aggregation bias for a developing country: The case of Mexico
- Creators
- Raymond Robertson - Macalester CollegeAnil Kumar - Federal Reserve Bank of DallasDonald H. Dutkowsky - Syracuse University
- Resource Type
- Journal article
- Publication Details
- Journal of development economics, Vol.90(2), pp.237-243
- Publisher
- Elsevier B.V
- DOI
- 10.1016/j.jdeveco.2008.11.009
- ISSN
- 0304-3878
- eISSN
- 1872-6089
- Language
- English
- Date published
- 11/01/2009
- Academic Unit
- Economics
- Record Identifier
- 9984618648602771
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