Long-run PPP may not hold after all

By Charles M. Engel. 2000

355 citations recorded by the source corpus.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/fd4e22cee7f2d6b829acf9b0db6e9ca1f0e2e3b3

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Citations in the corpus

Confidence Intervals for Half-Life Deviations From Purchasing Power Parity (2005, background): “Some researchers have recently addressed the question of size distortions of tests in the presence of persistent real exchange rates and their implications for the PPP debate (see Engel 2000; Caner and Kilian 2001).”
Purchasing power parity and country characteristics: Evidence from panel data tests (2007, background): “These include a unit root; Engel (2000), a deterministic trend; Obstfeld (1993), and a one-time change in the mean; Dornbusch and Vogelsang (1991).”
Size and Power of Tests for Stationarity in Highly Autocorrelated Time Series (2005, neutral): “Furthermore, in the light of part (iv) of Proposition 2 and Figure 1, Engel’s (2000) observation that L(λ̂A,B) has very low power in 100 years of simulated quarterly”
Tests for Unit-Root versus Threshold Specification With an Application to the Purchasing Power Parity Relationship (2004, background): “A related argument was put forward by Engel (2000), who attributed the failure of PPP to the presence of a nonstationary nontradable relative component in the price index.”
Testing for PPP: Should we use panel methods? (2005, background): “1This over-sizing property of panel unit root tests has also been discussed by Engel (2000) and O’Connell (1998) in slightly di¤erent contexts.”
The Great Appreciation, the Great Depreciation, and the Purchasing Power Parity Hypothesis (2002, background): “Even the 1% size adjusted power is over .70 31 The tests are also not necessarily correctly sized if the data is generated as a sum of a stationary and a unit root process as in Engel (2000).”
A Century of Purchasing-Power Parity (2002, neutral): “Others caution that detecting a unit root in time series may be complicated by the fact that price indices can be viewed as the sum of a stationary tradable relative-price component and a nonstationary nontradable relative-price component (Engel, 2000; Ng & Perron, 1999).”
Real and Financial Integration in East Asia (2012, neutral): “Most early studies failed to find evidence supporting relative PPP (see Rogoff, 1996 for a survey), but more recent studies show mixed results (for example, Taylor, 2001, 2002, Murray and Papell, 2002, Engel, 2000).”
Exchange rate puzzles: A tale of switching attractors (2006, neutral): “importance of transactions costs in the goods market for our understanding of the dynamics of exchange rate adjustments (Michael, Nobay and Peel, l997; O’ Connell, l998; Obstfeld and Rogoff, 2000; Engel, 2000; Kilian and Taylor, 2003).”
Dissecting the PPP Puzzle: The Unconventional Roles of Nominal Exchange Rate and Price Adjustments (2004, neutral): “…reversion has been documented (Frankel and Rose, 1996; Oh, 1996; Wu, 1996; Papell, 1997; Cheung and Lai, 1998, 2000a; Taylor and Sarno, 1998; Wu and Wu, 2001; Engel, 2000, gives an exception), consensus estimates of the reversion speed are remarkably slow with half-lives ranging from 3 to 5 years.”