CEU Electronic Theses and Dissertations, 2013
| Author | Rajczi, Rudolf |
|---|---|
| Title | Aggregation Bias and the PPP Puzzle |
| Summary | Using an extensive data set of European disaggregate price indices I reexamine Imbs et al.'s (2005b) ndings on the importance of dynamic aggregation bias in explaining the Purchasing Power Parity puzzle. My results suggest that there is clear evidence for such bias in sectoral data, but allowing for heterogeneous adjustment processes across panel members can in large extent explain the aggregation bias even on the country-level. Once heterogeneity is taken into account and the cross-sectional correlation of the error terms is controlled for, the estimated half-life of shocks hitting the real exchange rates can drop below one year, providing further empirical support against Rogo ff's famous puzzle. |
| Supervisor | Ratfai, Attila |
| Department | Economics MA |
| Full text | https://www.etd.ceu.edu/2013/rajczi_rudolf.pdf |
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