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ABSTRACT Price convergence and goods market integration are examined between GCC countries and the U.S. by testing the long-run relationship between domestic and exchange rate adjusted foreign prices, as embedded… Click to show full abstract
ABSTRACT Price convergence and goods market integration are examined between GCC countries and the U.S. by testing the long-run relationship between domestic and exchange rate adjusted foreign prices, as embedded in conventional and ex-ante PPP. The results of cointegration tests confirm the invalidity of conventional PPP in the long run, and the implication that the real exchange rate should be stationary over time is also rejected when tested using a battery of linear and nonlinear tests. In contrast, not only are cointegration tests supportive of ex-ante PPP in all cases but they also do not reject the restrictions it involves.
Journal Title: Macroeconomics and Finance in Emerging Market Economies
Year Published: 2020
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