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Testing For Ppp Using Sadc Real Exchange Rates

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  • Thabo m. Mokoena
  • Rangan Gupta
  • Reneé Van eyden

Abstract

This paper attempts to provide evidence indicating that the purchasing power parity (PPP) puzzle is becoming less of a puzzle. It present the results of Augmented Dickey-Fuller test, non-linear tests of non-stationarity and Bayesian unit root tests, applied to 10 Southern African Development Community countries. The Bayesian tests were found to be biased in favour of a trend stationary model in all cases. It is argued that non-linear approaches to exchange rate adjustments are likely to provide a firmer basis for inference and stronger support for the PPP in the long-term. This is more so at 1 and 5% levels of significance. Copyright (c) 2009 The Authors. Journal compilation (c) 2009 Economic Society of South Africa.

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Bibliographic Info

Article provided by Economic Society of South Africa in its journal South African Journal of Economics.

Volume (Year): 77 (2009)
Issue (Month): 3 (09)
Pages: 351-362

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Handle: RePEc:bla:sajeco:v:77:y:2009:i:3:p:351-362

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Cited by:
  1. Riané de Bruyn & Rangan Gupta & Lardo Stander, 2013. "Testing the Monetary Model for Exchange Rate Determination in South Africa: Evidence from 101 Years of Data," Contemporary Economics, University of Finance and Management in Warsaw, vol. 7(1), March.
  2. Thabo M. Mokoena & Gupta, R. & Van Eyden, R., 2009. "Half-Life Deviations from PPP in the South African Development Community (SADC)," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 9(1).

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