The validity of PPP: evidence from Lagrange multiplier unit root tests for ASEAN countries
AbstractThe univariate and panel Lagrange Multiplier (LM) unit root tests with one and two structural breaks proposed by Lee and Strazicich (2003, 2004) which are considerably more powerful than traditional tests are employed to investigate whether the purchasing power parity (PPP) theory holds true for ASEAN countries by using both black market and official exchange rates. We find strong evidence in favour of long-run PPP for six ASEAN countries namely, Indonesia, Malaysia, Myanmar, Philippines, Singapore and Thailand.
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Bibliographic InfoArticle provided by AccessEcon in its journal Economics Bulletin.
Volume (Year): 30 (2010)
Issue (Month): 2 ()
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PPP; ASEAN; LM unit root;
Find related papers by JEL classification:
- F3 - International Economics - - International Finance
- C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
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