NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Unbiased Estimation of the Half-Life to PPP Convergence in Panel Data

Chi-Young Choi, Nelson Mark, Donggyu Sul

NBER Working Paper No. 10614
Issued in July 2004
NBER Program(s):   IFM

Three potential sources of bias present complications for estimating the half-life of purchasing power parity deviations from panel data. They are the bias associated with inapproiate aggregation across heterogeneous coefficients, time aggregation of commodity prices, and downward bias in estimation of dynamic lag coefficients. Each of these biases have been addressed individually in the literature. In this paper, we address all three biases in arriving at our estimates. Analyzing an annual panel data set of real exchange rates for 21 OECD countries from 1948 to 2002, our point estimate of the half-life is 5.5 years.

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Document Object Identifier (DOI): 10.3386/w10614

Published: Choi, Chi-Young, Nelson C. Mark and Donggyu Sul. "Unbiased Estimation Of The Half-Life To PPP Convergence In Panel Data," Journal of Money, Credit and Banking, 2006, v38(4,Jun), 921-938.

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