An econometric study on purchasing-power parity

Brito, Márcio Holland de
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In this work we address some unresolved purchasing-power parity (PPP) puzzles; during the process we propose a new nonlinear model and check the role of temporal aggregation and of datasets covering only a small period of time. The hypothesis that there is no convergence force acting on ARER has been strongly statistically rejected and the nonlinearity showed itself as an important issue. The half-lives found for Brazil using standard models seem to be one of the smallest ever found for a country. However, we concluded that the speed of converge towards PPP is not a consensus yet. Besides, we expect to give contributions to PPP literature by pointing out important results and potential pitfalls on PPP research.

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