{
  "title": "Testing for Purchasing Power Parity in Cointegrated Panels",
  "publication": "IMF Working Papers, December 1, 2007",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/31/testing-for-purchasing-power-parity-in-cointegrated-panels-21498",
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  "summary": "This paper applies the maximum likelihood panel cointegration method of Larsson and Lyhagen (2007) to test the strong PPP hypothesis using data for the G7 countries.",
  "sections": [
    {
      "heading": "Authors and publication",
      "content": "- By Johan Lyhagen, Pär Österholm, Mikael Carlsson\n- December 1, 2007\n- IMF Working Papers, Working Paper No. 2007/287\n- Issue: 287\n- Volume: 2007\n- Pages: 19"
    },
    {
      "heading": "Research question and scope",
      "content": "- Tests the strong Purchasing Power Parity (PPP) hypothesis using data for the G7 countries.\n- Focuses on whether exchange rates and price levels satisfy strong PPP or instead support weak PPP with heterogeneous cointegrating vectors."
    },
    {
      "heading": "Methodology",
      "content": "- Applies the maximum likelihood panel cointegration method of Larsson and Lyhagen (2007).\n- Contrasts results with:\n  - Pedroni (1995) cointegration tests.\n  - Fully modified OLS estimators of the cointegrating vectors.\n  - Dynamic OLS estimators of the cointegrating vectors.\n- Emphasizes robustness to cross-sectional dependence of error terms as a key advantage of the Larsson and Lyhagen (2007) method."
    },
    {
      "heading": "Key findings",
      "content": "- The strong PPP hypothesis is rejected.\n- Evidence supports weak PPP with heterogeneous cointegrating vectors.\n- Results are the same across all approaches used (maximum likelihood panel cointegration, Pedroni tests, fully modified OLS, and dynamic OLS)."
    },
    {
      "heading": "Keywords and subjects",
      "content": "- Subject: Exchange rates, Purchasing power parity\n- Keywords: integrating vector, WP"
    },
    {
      "heading": "Publication identifiers and access",
      "content": "- DOI: https://doi.org/10.5089/9781451868500.001\n- ISBN: 9781451868500\n- ISSN: 1018-5941\n- Stock No: WPIEA2007287\n\nThis Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy.\n\n---\n\n Content in this bundle\n\n- wp07287\n  - wp07287 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - wp07287 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/testing-for-purchasing-power-parity-in-cointegrated-panels-21498"
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    "Authors: Johan Lyhagen, Pär Österholm, Mikael Carlsson",
    "Published: December 1, 2007",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781451868500.001",
    "By Johan Lyhagen, Pär Österholm, Mikael Carlsson",
    "December 1, 2007",
    "IMF Working Papers, Working Paper No. 2007/287",
    "Issue: 287",
    "Volume: 2007",
    "Pages: 19",
    "Tests the strong Purchasing Power Parity (PPP) hypothesis using data for the G7 countries.",
    "Focuses on whether exchange rates and price levels satisfy strong PPP or instead support weak PPP with heterogeneous cointegrating vectors.",
    "Applies the maximum likelihood panel cointegration method of Larsson and Lyhagen (2007).",
    "Contrasts results with:",
    "Emphasizes robustness to cross-sectional dependence of error terms as a key advantage of the Larsson and Lyhagen (2007) method.",
    "The strong PPP hypothesis is rejected.",
    "Evidence supports weak PPP with heterogeneous cointegrating vectors.",
    "Results are the same across all approaches used (maximum likelihood panel cointegration, Pedroni tests, fully modified OLS, and dynamic OLS).",
    "Subject: Exchange rates, Purchasing power parity",
    "Keywords: integrating vector, WP",
    "DOI: https://doi.org/10.5089/9781451868500.001",
    "ISBN: 9781451868500",
    "ISSN: 1018-5941",
    "Stock No: WPIEA2007287",
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