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Journal of Time Series Econometrics

Editor-in-Chief: Hidalgo, Javier

2 Issues per year


CiteScore 2017: 0.25

SCImago Journal Rank (SJR) 2017: 0.236
Source Normalized Impact per Paper (SNIP) 2017: 0.682

Online
ISSN
1941-1928
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Price Level Convergence, Purchasing Power Parity and Multiple Structural Breaks in Panel Data Analysis: An Application to U.S. Cities

Syed A. Basher / Josep Lluís Carrion-i-Silvestre
Published Online: 2009-04-02 | DOI: https://doi.org/10.2202/1941-1928.1000

This article provides a methodological and empirical approach for assessing price level convergence and its relation to purchasing power parity (PPP) using annual price data for seventeen U.S. cities during the period 1918 to 2005. We suggest a new panel data procedure that can handle a wide range of PPP concepts in the presence of multiple structural breaks using all possible pairs of real exchange rates. Testing for PPP requires the definition of parametric restrictions (parity restrictions) across regimes. In general, we find more evidence for stationarity when the parity restriction is not imposed, while imposing parity restriction leads toward the rejection of the panel stationarity. Our results can be embedded in the view of the Balassa-Samuelson approach, but where the slope of the time trend is allowed to change in the long-run.

Keywords: price level convergence; pairwise analysis; panel data; multiple structural breaks; cross-section dependence

About the article

Published Online: 2009-04-02


Citation Information: Journal of Time Series Econometrics, Volume 1, Issue 1, ISSN (Online) 1941-1928, DOI: https://doi.org/10.2202/1941-1928.1000.

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