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http://dspace.mediu.edu.my:8181/xmlui/handle/10419/17952| Title: | Uncover Latent PPP by Dynamic Factor Error Correction Model (DF-ECM) Approach: Evidence from five OECD countries |
| Keywords: | C22 F31 C33 ddc:330 PPP law of one price dynamic factor error correction |
| Issue Date: | 16-Oct-2013 |
| Publisher: | Kiel Institute for the World Economy (IfW) Kiel |
| Description: | This study explores a new modelling approach to bridge the gap between the bilateral setting of one ?domestic? economy facing one ?foreign? entity in theory and multilateral country data in reality. Under the approach, purchasing power parity (PPP) is embedded in latent disequilibrium factors, being extracted from a large set of bilateral price disparities; the factors are then used as error-correction leading indicators to explain exchange rate and inflation. Modelling experiments on five OECD countries using monthly data show promising results, which reverse the common belief that PPP is at best a very long-run relationship at the macro level. |
| URI: | http://koha.mediu.edu.my:8181/xmlui/handle/10419/17952 |
| Other Identifiers: | http://hdl.handle.net/10419/17952 ppn:558295029 RePEc:zbw:ifwedp:5734 |
| Appears in Collections: | EconStor |
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