TY - JOUR
T1 - PPP
T2 - Further evidence from Japanese regional data
AU - Nagayasu, Jun
AU - Inakura, Noriko
N1 - Funding Information:
The second author is a PhD candidate at the University of Tsukuba. The earlier version of this paper was presented at the annual meeting of the Japanese Economic Association in Fukushima (2006) and the Western Economic Association in Beijing (2007). We are grateful for comments from Michael Devereux, anonymous referees, Saang Joon Baak, Phillipe Burger, Taro Esaka, Keun Ho Lee, Hiranya Nath, Peter McAdam, Masakatsu Okubo, and other conference participants. However, all remaining errors are ours. This study was supported by a grant-in-aid from the Zengin Foundation for Studies on Economics and Finance.
Copyright:
Copyright 2009 Elsevier B.V., All rights reserved.
PY - 2009/6
Y1 - 2009/6
N2 - This paper empirically analyzes Purchasing Power Parity (PPP) among Japanese municipalities from 1990 to 2003. Using panel unit root tests including one that considers cross-sectional dependence in the data (e.g., [Moon, H. R. and Perron, B. (2004). Testing for a unit root in panels with dynamic factors. Journal of Econometrics, 112, 81-126.]), we find evidence in favor of PPP, confirming the stationarity of relative prices in Japan and thus the long-run co-movement of municipal prices. Furthermore, the half-life of a shock is found to be about 2 years, which is faster than that of the international PPP. As in the European and US studies, short-term deviations from PPP can be explained by income differentials and distance between cities.
AB - This paper empirically analyzes Purchasing Power Parity (PPP) among Japanese municipalities from 1990 to 2003. Using panel unit root tests including one that considers cross-sectional dependence in the data (e.g., [Moon, H. R. and Perron, B. (2004). Testing for a unit root in panels with dynamic factors. Journal of Econometrics, 112, 81-126.]), we find evidence in favor of PPP, confirming the stationarity of relative prices in Japan and thus the long-run co-movement of municipal prices. Furthermore, the half-life of a shock is found to be about 2 years, which is faster than that of the international PPP. As in the European and US studies, short-term deviations from PPP can be explained by income differentials and distance between cities.
KW - Convergence speed
KW - GMM
KW - Japanese municipal data
KW - Panel unit root tests
KW - Purchasing power parity
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U2 - 10.1016/j.iref.2008.09.003
DO - 10.1016/j.iref.2008.09.003
M3 - Article
AN - SCOPUS:67349092413
VL - 18
SP - 419
EP - 427
JO - International Review of Economics and Finance
JF - International Review of Economics and Finance
SN - 1059-0560
IS - 3
ER -