PPP: Further evidence from Japanese regional data

Jun Nagayasu, Noriko Inakura

Research output: Contribution to journalArticlepeer-review

15 Citations (Scopus)

Abstract

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.

Original languageEnglish
Pages (from-to)419-427
Number of pages9
JournalInternational Review of Economics and Finance
Volume18
Issue number3
DOIs
Publication statusPublished - 2009 Jun 1
Externally publishedYes

Keywords

  • Convergence speed
  • GMM
  • Japanese municipal data
  • Panel unit root tests
  • Purchasing power parity

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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