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Purchasing Power Parity Across States and Goods Within Australia *
Author(s) -
CHAUDHURI KAUSIK,
SHEEN JEFFREY
Publication year - 2004
Publication title -
economic record
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.365
H-Index - 42
eISSN - 1475-4932
pISSN - 0013-0249
DOI - 10.1111/j.1475-4932.2004.00191.x
Subject(s) - purchasing power parity , unit root , relative purchasing power parity , economics , parity (physics) , purchasing , inflation (cosmology) , monetary economics , demographic economics , exchange rate , econometrics , operations management , theoretical physics , physics , particle physics
Panel unit root tests show that intranational purchasing power parity cannot be rejected across major Australian cities from 1972:3 to 1999:1. The persistence of deviations in response to shocks is low, as measured by the estimated exact half‐life of between five and ten quarters. This is much lower than results for similar tests done on US cities, and for international purchasing power parity tests. The food CPI is largely responsible for the fast convergent results for city CPIs. Intranational purchasing power parity was rejected for the floating exchange rate period from 1984 to 1991 when inflation was high and not specifically targeted by the central bank.