@techreport{9a20d84e8eae4b13a0d65b94be56512a,
title = "Re-evaluating whether absolute or relative purchasing power parity is being tested when using price indices",
abstract = "A growing body of research suggests that the literature applying unit root, stationarity and cointegration tests of long run purchasing power parity (PPP) and the law of one price (LOP) with price index data test relative PPP/LOP and not absolute PPP/LOP. We argue that such tests cannot determine when long run relative PPP/LOP is rejected and therefore are not tests of relative PPP/LOP. These are not tests of strong absolute PPP/LOP either. We contend that they are tests of weaker forms of absolute PPP/LOP and that determining which form of absolute PPP/LOP is useful in terms of, for example, establishing the form of long run flexible-price monetary exchange rate model that it implies.",
keywords = "Economics and econometrics, absolute purchasing power parity, price indi, relative purchasing power parity, the law of one price",
author = "Chris Stewart",
year = "2023",
month = apr,
day = "28",
language = "English",
series = "Economics Discussion Paper",
publisher = "Kingston University",
number = "2023-1",
address = "United Kingdom",
type = "WorkingPaper",
institution = "Kingston University",
}