Journal article
Weak-form and strong-form purchasing power parity between the US and Mexico: A panel cointegration investigation
Journal of macroeconomics, Vol.42, pp.241-262
12/01/2014
DOI: 10.1016/j.jmacro.2014.08.005
Abstract
•We use matched product-level data for the US and Mexico.•We use panel cointegration techniques to evaluate purchasing power parity.•We find strong-form PPP for traded goods.•Strong-form PPP is rejected for non-traded goods.
This study examines the long-run relationship between US and Mexican prices. We use panel cointegration techniques that allow for heterogeneous relationships across goods to examine the existence of weak-form and strong-form Purchasing Power Parity (PPP) between the US and Mexico. We construct and work with a panel of highly disaggregated data, matched prices of individual products sold in each country. Our findings provide overwhelming support for weak-form PPP, but less support for strong-form PPP. Strong-form PPP, though, emerges among actively-traded goods. In contrast, non-traded goods exhibit amplified reaction to price changes in Mexico relative to those from the US.
Details
- Title: Subtitle
- Weak-form and strong-form purchasing power parity between the US and Mexico: A panel cointegration investigation
- Creators
- Raymond Robertson - Macalester CollegeAnil Kumar - Federal Reserve Bank of DallasDonald H. Dutkowsky - Syracuse University
- Resource Type
- Journal article
- Publication Details
- Journal of macroeconomics, Vol.42, pp.241-262
- Publisher
- Elsevier Inc
- DOI
- 10.1016/j.jmacro.2014.08.005
- ISSN
- 0164-0704
- eISSN
- 1873-152X
- Language
- English
- Date published
- 12/01/2014
- Academic Unit
- Economics
- Record Identifier
- 9984618638902771
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