Weak-form and strong-form purchasing power parity between the US and Mexico: A panel cointegration investigation

Raymond Robertson, Anil Kumar, Donald H. Dutkowsky

Research output: Contribution to journalArticle

5 Scopus citations

Abstract

This study examines the long-run relationship between US and Mexican prices. We use panel cointegration techniques that allow for heterogeneous relationships across goods to examine the existence of weak-form and strong-form Purchasing Power Parity (PPP) between the US and Mexico. We construct and work with a panel of highly disaggregated data, matched prices of individual products sold in each country. Our findings provide overwhelming support for weak-form PPP, but less support for strong-form PPP. Strong-form PPP, though, emerges among actively-traded goods. In contrast, non-traded goods exhibit amplified reaction to price changes in Mexico relative to those from the US.

Original languageEnglish (US)
Pages (from-to)241-262
Number of pages22
JournalJournal of Macroeconomics
Volume42
DOIs
StatePublished - Dec 1 2014

Keywords

  • Cointegration
  • Mexico
  • Purchasing power parity (PPP)
  • Strong-form PPP
  • Weak-form PPP

ASJC Scopus subject areas

  • Economics and Econometrics

Fingerprint Dive into the research topics of 'Weak-form and strong-form purchasing power parity between the US and Mexico: A panel cointegration investigation'. Together they form a unique fingerprint.

  • Cite this