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Journal of Business & Economic Statistics Volume 17, 1999 - Issue 4
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Original Articles

Testing Symmetry and Proportionality in PPP: A Panel-Data Approach

Kai Li Faculty of Commerce, University of British Columbia, Vancouver, BC, V6T 1Z2, Canada
Pages 409-418 | Published online: 02 Jul 2012
 
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Abstract

Purchasing power parity (PPP) is a proposition equating the nominal exchange rate to the ratio of the domestic to foreign price levels. This article employs Bayesian panel-data methods to test for PPP, in particular, the implied symmetry and proportionality conditions. Using a dataset of all the Organization for Economic Cooperation and Development member countries in the post-Bretton Woods era, I do not find support for symmetry and proportionality in PPP over time and across countries.

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