Examining China: Purchasing Power Parity, Terms of Trade, and Real Exchange Rates

2018 ◽  
pp. 387-391
Author(s):  
Victor A. Canto ◽  
Andy Wiese
Keyword(s):  
Exchange Rates ◽  
Purchasing Power Parity ◽  
Real Exchange Rates ◽  
Terms Of Trade ◽  
Purchasing Power ◽  
Power Parity

Purchasing Power Parity and the Law of One Price: Evidence from Commodity Prices in Asian Countries

2015 ◽  
Vol 15 (2) ◽  
pp. 231-240 ◽  
Author(s):  
Mohsen Bahmani-Oskooee ◽  
ABM Nasir
Keyword(s):  
Exchange Rates ◽  
Purchasing Power Parity ◽  
Real Exchange Rates ◽  
Strong Support ◽  
Commodity Prices ◽  
Law Of One Price ◽  
Purchasing Power ◽  
Power Parity ◽  
Industrial Countries ◽  
The Law

Almost all previous studies that have tested the law of one price or Purchasing Power Parity theory (PPP) have used either real effective exchange rates or bilateral real exchange rates which are constructed using CPI or PPI data. Most of these studies have failed to support the PPP mostly due to aggregation bias. A few recent studies, have, therefore used commodity prices in different countries and have provided strong support for the theory. These studies have mostly used data from industrial countries. In this paper, we use individual prices of 52 retail items from 15 cities in Asia and test for stationarity of the real exchange rate and speed of adjustment. We provide support for PPP in 63% of the cases. We also find that using individual prices lead to faster convergence of real rates toward their PPP values.

scholarly journals Empirical verification of the purchasing power parity

2012 ◽  
Vol 3 (3) ◽  
pp. 37-61
Author(s):  
Jakub Wiśniewski
Keyword(s):  
Exchange Rates ◽  
Purchasing Power Parity ◽  
Real Exchange Rates ◽  
Purchasing Power ◽  
International Literature ◽  
Power Parity ◽  
Theoretical Justification ◽  
Quarterly Data ◽  
Empirical Verification ◽  
Time Period

This paper attempts to empirically verify the Purchasing Power Parity. Particular attention has been paid to the possible reasons behind the deviations of exchange rates from the values implied by the parity and to the theoretical justification of this phenomenon. Formal empirical verification was based on econometric tools appropriate to investigate the cointegration of exchange rates and prices, as well as the stationarity of real exchange rates. The analysis used quarterly data sourced from the “OECD Statistical Compendium 2009” during the 1970-2009 time period. The paper ends with interpretation of findings in the context of the exiting international literature.

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