Is The Purchasing Power Parity Supported by the Data?

1. Source :

Guang Fang, “  Is The Purchasing Parity Supported by the Data?”, Massey University, Palmerston North Campus, manwatu, New Zealand. Chinese Business Review, ISSN, 1537-1506, Feb2011, Vol.10, No. 2, 84-89.

2.Theoretical basic :

Purchasing Power Parity

3. Methodology :

-  Formula of the relative PPP 

-  Linear regression model : Analysis of the data and the regression results. Then using these results into testing the relative PPP theory and the real exchange rates.

4. Data collection:

The quarterly selected data contains the exchange rate of US dollar against New Zealand during a time period between September, 30^th 1914 to March 31^st 2010.

5. Empirical result:

The PPP theory is not supported by the data. However, the long-run PPP does hold.

6. Difficulty and Problems :

 The data for this paper is collected quarterly from 1914 to end of 2010. I want to imitate this paper and use the data of USA and Taiwan instead. However, as limitation on finding data, I could just only get the annually data, not quarterly as original paper, and the time horizon would be shorter, from 1981 to end of 2010.