Purchasing Power Parity Across States and Goods Within Australia

Panel unit root tests show that intranational purchasing power parity cannot be rejected across major Australian cities from 1972:3 to 1999:1. The persistence of deviations in response to shocks is low, as measured by the estimated exact half‐life of between five and ten quarters. This is much lower...

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Bibliographic Details
Published in:The Economic record 2004-09, Vol.80 (250), p.314-329
Main Authors: CHAUDHURI, KAUSIK, SHEEN, JEFFREY
Format: Article
Language:English
Subjects:
Arbitrage
Australia
Central banks
Cities
Comparative analysis
Consumer Price Index
Costs
Economic indicators
Economic theory
Equilibrium
Exchange rates
Fixed exchange rates
Floating exchange rates
Foreign exchange rates
Hypotheses
Inflation
Monetary economics
Monetary policy
Price index
Prices
Purchasing power parity
Studies
U.S.A
Violations
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Summary:Panel unit root tests show that intranational purchasing power parity cannot be rejected across major Australian cities from 1972:3 to 1999:1. The persistence of deviations in response to shocks is low, as measured by the estimated exact half‐life of between five and ten quarters. This is much lower than results for similar tests done on US cities, and for international purchasing power parity tests. The food CPI is largely responsible for the fast convergent results for city CPIs. Intranational purchasing power parity was rejected for the floating exchange rate period from 1984 to 1991 when inflation was high and not specifically targeted by the central bank.
ISSN:0013-0249
1475-4932
DOI:10.1111/j.1475-4932.2004.00191.x