Detecting intra-national PPP model in China: A median-unbiased estimation approach

Abstract

This paper studies the speed of price adjustments toward the intra-national PPP level within China based on half-life measurement. We calculate the point estimates of half-lives and the corresponding confidence intervals using median-unbiased estimation methods to correct for downward bias in least squares estimates. The point estimates of half-lives indicate that the speed of mean reversion toward convergence between region pairs is fast. A strong conclusion about the high speed of adjustments is, however, unwarranted in some regions where the confidence intervals for half-life estimates are much wider than others.