PURCHASING POWER PARITY AND UNIT-ROOT TESTS USING PANEL-DATA

This paper reports the results of unit root tests for real exchange ra tes using a panel framework. This panel approach provides greatly impr oved power compared to conventional univariate time series unit root t ests. We obtain evidence supporting PPP over the recent flexible excha nge rate period for G-6 and OECD countries. We show explicitly that fa ilure to find such evidence in previous research was due to the low po wer of the tests. (JEL F31). Copyright (C) 1996 Elsevier Science Ltd