{
  "title": "An Unbiased Appraisal of Purchasing Power Parity",
  "publication": "IMF Working Papers, December 1, 2001",
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  "summary": "Univariate studies of the hypothesis of unit roots in real exchange rates have yielded consensus point estimates of the half-life of deviations from purchasing power parity of between three to five years. However, least squares-based estimates of half-lives are biased downward.",
  "sections": [
    {
      "heading": "Summary of the study",
      "content": "- Univariate studies of the hypothesis of unit roots in real exchange rates have yielded consensus point estimates of the half-life of deviations from purchasing power parity of between three to five years.\n- Least squares-based estimates of half-lives are biased downward.\n- The paper follows Andrews (1993) and uses median-unbiased estimators of the half-life of deviations from parity as a preferred measure of the persistence of real exchange rate shocks.\n- The study uses real effective exchange rate (REER) data for 22 industrial countries in the post-Bretton Woods period.\n- Three methods of bias correction are implemented, yielding cross-country averages of half-lives of deviations from parity ranging between 4 to 15 years.\n- The REER of several countries display permanent deviations from parity."
    },
    {
      "heading": "Data and methodology",
      "content": "- Data: real effective exchange rate (REER) data for 22 industrial countries in the post-Bretton Woods period.\n- Estimation approach: median-unbiased estimation following Andrews (1993) as an alternative to least squares-based estimators.\n- Bias-correction: three methods of bias correction are implemented (methods not enumerated on the landing page)."
    },
    {
      "heading": "Key findings and quantitative results",
      "content": "- Consensus point estimates from prior univariate studies: half-life between 3 to 5 years.\n- Bias in least squares: least squares-based estimates of half-lives are biased downward (no numeric bias amount provided on the landing page).\n- Bias-corrected results: cross-country averages of half-lives range between 4 to 15 years.\n- Some countries’ REERs exhibit permanent deviations from purchasing power parity."
    },
    {
      "heading": "Subject classification and keywords (as listed)",
      "content": "- Subject: Exchange rate modelling, Exchange rates, Foreign exchange, Purchasing power parity, Real effective exchange rates, Real exchange rates\n- Keywords: confidence interval from zero, estimation procedure, Exchange rate modelling, Exchange rates, interval estimate, interval estimation, least squares, least squares estimates of the Augmented Dickey-Fuller, least squares estimator, LS counterpart, LS estimate, Median-unbiased estimation, null hypothesis, Phillips-perron estimate, point estimate, purchasing power parity, Real effective exchange rates, Real exchange rates, shock persistence, time series, unit root model, WP\n\n---\n\n Content in this bundle\n\n- An Unbiased Appraisal of Purchasing Power Parity - WP/01/196\n  - An Unbiased Appraisal of Purchasing Power Parity - WP/01/196 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - An Unbiased Appraisal of Purchasing Power Parity - WP/01/196 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/30/an-unbiased-appraisal-of-purchasing-power-parity-15512"
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    "Authors: C. John McDermott, Paul Cashin",
    "Published: December 1, 2001",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781451859966.001",
    "Univariate studies of the hypothesis of unit roots in real exchange rates have yielded consensus point estimates of the half-life of deviations from purchasing power parity of between three to five years.",
    "Least squares-based estimates of half-lives are biased downward.",
    "The paper follows Andrews (1993) and uses median-unbiased estimators of the half-life of deviations from parity as a preferred measure of the persistence of real exchange rate shocks.",
    "The study uses real effective exchange rate (REER) data for 22 industrial countries in the post-Bretton Woods period.",
    "Three methods of bias correction are implemented, yielding cross-country averages of half-lives of deviations from parity ranging between 4 to 15 years.",
    "The REER of several countries display permanent deviations from parity.",
    "Data: real effective exchange rate (REER) data for 22 industrial countries in the post-Bretton Woods period.",
    "Estimation approach: median-unbiased estimation following Andrews (1993) as an alternative to least squares-based estimators.",
    "Bias-correction: three methods of bias correction are implemented (methods not enumerated on the landing page).",
    "Consensus point estimates from prior univariate studies: half-life between 3 to 5 years.",
    "Bias in least squares: least squares-based estimates of half-lives are biased downward (no numeric bias amount provided on the landing page).",
    "Bias-corrected results: cross-country averages of half-lives range between 4 to 15 years.",
    "Some countries’ REERs exhibit permanent deviations from purchasing power parity.",
    "Subject: Exchange rate modelling, Exchange rates, Foreign exchange, Purchasing power parity, Real effective exchange rates, Real exchange rates",
    "Keywords: confidence interval from zero, estimation procedure, Exchange rate modelling, Exchange rates, interval estimate, interval estimation, least squares, least squares estimates of the Augmented Dickey-Fuller, least squares estimator, LS counterpart, LS estimate, Median-unbiased estimation, null hypothesis, Phillips-perron estimate, point estimate, purchasing power parity, Real effective exchange rates, Real exchange rates, shock persistence, time series, unit root model, WP",
    "**An Unbiased Appraisal of Purchasing Power Parity - WP/01/196**"
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