SEARCHING FOR STATIONARITY - PURCHASING POWER PARITY UNDER THE CURRENT FLOAT

Using panel data methods, we investigate long-run purchasing power par ity by testing for unit roots in real exchange rates of industrial cou ntries under the current float. The evidence against the unit root hyp othesis is stronger for larger than for smaller panels, for monthly th an for quarterly data, and when the German mark, rather than the Unite d States dollar, is used as the base currency. While we find that acco unting for serial correlation considerably weakens the evidence agains t the unit root null, the results as a whole are consistent with long- run purchasing power parity.