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Author: | Chen, N. |
Title: | The behaviour of relative prices in the European Union: a sectoral analysis. |
Journal: | European Economic Review
2004 : DEC VOL. 48:6, p.1257-1286 |
Index terms: | Prices European Union Multivariate analysis Models |
Freeterms: | Mean reversion PPP |
Language: | eng |
Abstract: | This article analyses empirically the Purchasing Power Parity (hereafter as: PPP) hypothesis at the sectoral level across six European countries over the last 17 years. Using multivariate unit root test methods, indication of mean reversion towards PPP is found for the relative prices of some sectors and countries. Mean reversion is explained by cross-country and cross-sectoral features, e.g. geographical distance, nominal exchange rate volatility, differences in GDP per capita, non-tariff barriers, research and development, advertising, industrial concentration and tradeability of the products. |
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