NDLI: Does "aggregation bias" explain the PPP puzzle?

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Does "aggregation bias" explain the PPP puzzle?

Content Provider	Library of Congress - Books/Printed Material
Author	Chen, Shiu-Sheng. White, Michelle J.
Temporal Coverage	2004
Copyright Year	2004
Abstract	"Recently, Imbs ... [et al.] (2002) have claimed that much of the purchasing power parity puzzle can be explained by aggregation bias'. This paper re-examines aggregation bias. First, it clarifies the meaning of aggregation bias and its applicability to the PPP puzzle. Second, the size of the bias' is shown to be much smaller than the simulations in Imbs et. al. (2002) suggest, if we rule out explosive roots in the simulations. Third, we show that the presence of non-persistent measurement error especially in the Imbs ... [et al.] (2002) data can make price series appear less persistent than they really are. Finally, it is now standard to recognize that small-sample bias plagues estimates of speeds of convergence of PPP. After correcting small sample bias by methods proposed by Kilian (1998) and by So and Shin (1999), the half-life estimates indicate that heterogeneity and aggregation bias do not help to solve the PPP puzzle"--National Bureau of Economic Research web site.
Language	English
Publisher	National Bureau of Economic Research
Publisher Place	Cambridge, MA
Part of Series	Catalog
Requires	HTML5 supported browser
Access Restriction	Open
Subject Keyword	Purchasing Power Parity
Subject Domain (in LCSH)	Purchasing power parity
Subject Domain (in LCC)	HB1
Content Type	Text
Resource Type	Book

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