Aggregation bias does explain the PPP puzzle
By: Jean Imbs ... [et al.].
Contributors: Imbs, Jean.; National Bureau of Economic Research.
Series: NBER working paper paper series -- no. 11607.; Working paper series (National Bureau of Economic Research) -- working paper no. 11607.
Publisher: National Bureau of Economic Research
Published: 2005
Place of publication: Cambridge, Mass
Language: eng
Number of pages: 26
Subjects: Foreign exchange rates -- Econometric models
Other titles: Aggregation bias does explain the purchasing power parity puzzle.
Description: "This article summarizes our views on the role of an "aggregation bias" in explaining the PPP (i.e. purchasing power parity) Puzzle, in response to the several papers recently written in reaction to our initial contribution.  We discuss in particular the criticisms of Imbs, Mumtaz, Ravn and Rey (2002) presented in Chen and Engel (2005).  We show that their contentions are based on: (i) analytical counter-examples which are not empirically relevant; (ii) simulation results minimizing the extent of "aggregation bias"; (iii) unfounded claims on the impact of measurement errors on our results; and (iv) problematic implementation of small-sample bias corrections.  We conclude, as in our original paper, that "aggregation bias" goes a long way towards explaining the PPP puzzle"--National Bureau of Economic Research web site.
Notes: "September 2005."

Includes bibliographical references (p. 22-23).

Also available in PDF from the NBER world wide web site (www.nber.org).