TY - JOUR
T1 - Weak-form and strong-form purchasing power parity between the US and Mexico
T2 - A panel cointegration investigation
AU - Robertson, Raymond
AU - Kumar, Anil
AU - Dutkowsky, Donald H.
N1 - Publisher Copyright:
© 2014 Elsevier Inc.
PY - 2014/12/1
Y1 - 2014/12/1
N2 - 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.
AB - 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.
KW - Cointegration
KW - Mexico
KW - Purchasing power parity (PPP)
KW - Strong-form PPP
KW - Weak-form PPP
UR - http://www.scopus.com/inward/record.url?scp=84915808001&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=84915808001&partnerID=8YFLogxK
U2 - 10.1016/j.jmacro.2014.08.005
DO - 10.1016/j.jmacro.2014.08.005
M3 - Article
AN - SCOPUS:84915808001
SN - 0164-0704
VL - 42
SP - 241
EP - 262
JO - Journal of Macroeconomics
JF - Journal of Macroeconomics
ER -