EH.Net Abstracts in Economic History

                EHS Abstract Submission
                    (c) 1996 EH.Net
-----------------------------------------------------------
              Name:  Alan M. Taylor
             Email:  amtaylor at ucdavis.edu
       Institution:  University of California at Davis

         Co-author:

             Title:  International Capital Mobility in History: Purchasing
Power Parity in the Long Run

  Internet Address
of abstracted work:  http://www.econ.ucdavis.edu/~amtaylor/papers/

           By mail:
                     Department of Economics
                     University of California at Davis
                     One Shield Avenue
                     Davis, CA 95616-8578
 
          Language:  English

          Abstract:
   This paper investigates one widely-used criterion for capital market
integration,purchasing power parity (PPP), and its evolution over time
since the late nineteenth century for a sample of twenty countries. This
represents a broader
sample of pooled time-series than has been investigated before. Comparisons
of
econometric results for cross-sectional, time-series and panel samples
allows us
to test the robustness of the PPP hypothesis in different eras, such as the
gold-standard, interwar, Bretton Woods, and the recent float. The evidence
for
PPP is mixed: the strongest form of PPP, entailing stationarity of the real
exchange rate, is not broadly supported, and real exchange rate dispersion
shows
counterintuitive historical patterns. However, weaker forms of PPP can be
supported, with evidence of cointegration between different countries--
common-currency price levels. Residual variances here confirm the
conventional
wisdom that the interwar period, particularly the Great Depression,
represented
the nadir of international market integration in the modern era.

Bibliography:  Taylor, Alan M. "International Capital Mobility in History: 
Purchasing Power Parity in the Long Run."  NBER Working Paper Series no.
5743. 

           Subject:  W
 Geographical Area:  0
    Country/Region:  World
       Time Period:  7