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Purchasing Power Parity In African Countries: Evidence From Panel Suradf Test

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Author Info

  • Ahmad zubaidi Baharumshah
  • Evan Lau
  • Mudziviri t. Nziramasanga

Abstract

This study reexamines the validity of long-run purchasing power parity (PPP) hypothesis using a battery of panel unit root tests for 11 developing countries in Africa over the period 1980-2007. Based on the conventional panel unit root tests, we found evidence that the monthly real exchange rates in these countries were mean reverting. By contrast, the series-specific unit root test proposed by Breuer "et al." (SURADF) reveals that only six of the 11 RERs series were stationary using the US dollar as reference currency. Additionally, our results reveal that there is stronger evidence of the parity condition with the Rand-based rates than in the other currency-based rates like the US dollar or Euro. We conclude that PPP holds in some, but not all, of the African countries according to the SURADF tests. Copyright (c) 2010 The Authors. Journal compilation (c) 2010 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): 78 (2010)
Issue (Month): 1 (03)
Pages: 40-56

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Handle: RePEc:bla:sajeco:v:78:y:2010:i:1:p:40-56

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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. Su, Chi-Wei & Tsangyao, Chang & Chang, Hsu-Ling, 2011. "Purchasing power parity for fifteen Latin American countries: Stationary test with a Fourier function," International Review of Economics & Finance, Elsevier, vol. 20(4), pages 839-845, October.
  3. Chang, Tsangyao & Tzeng, Han-Wen, 2011. "Long-run purchasing power parity with asymmetric adjustment: Further evidence from nine transition countries," Economic Modelling, Elsevier, vol. 28(3), pages 1383-1391, May.

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