Understanding the Empirical Literature on Purchasing Power Parity: The Post-Bretton Woods Era
- 1 April 1994
- journal article
- Published by Board of Governors of the Federal Reserve System in International Finance Discussion Papers
- Vol. 1994.0 (465) , 1-32
- https://doi.org/10.17016/ifdp.1994.465
Abstract
Purchasing Power Parity (PPP) in the post-Bretton Woods era by and large has failed to stand up to empirical scrutiny. This paper sheds light on this failure by documenting the low small-sample power of existing empirical tests. We also implement new, more powerful tests that find moderate evidence in favor of PPP.Keywords
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