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Does Political Risk Lead to Purchasing Power Disparity? A Panel Disaggregated Approach

Author

Listed:
  • Goswami , Gour Gobinda

    (Associate Professor & Chairman, Department of Economics, North South University, Dhaka, Bangl)

  • Khan , Saima

    (* Undergraduate Student, Department of Economics, North South University, Dhaka, Bangladesh)

Abstract

Till date, few studies have attempted to study the impact of political risk on the purchasing power disparity, The studies conducted thus far have been restricted in terms of the political risk components used, countries examined and time span. We add to the existing literature by being the first to examine how thirteen different political risk indices introduced by International Country Risk Guide (henceforth, ICRG) affect the real exchange rate. In this study, we use 86 OECD and Non- OECD countries over the time period of 1984-1997, and carry out panel estimation techniques, which include one-way fixed-effects, two-way fixed-effects, one-way random-effects, and two-way random-effects. It is found that regardless of whether countries are classified according to income or region, in most of the cases political risk does have a significant impact on real exchange rate in that risk leads to either real appreciation epreciation and is instrumental in purchasing power disparity

Suggested Citation

  • Goswami , Gour Gobinda & Khan , Saima, 2005. "Does Political Risk Lead to Purchasing Power Disparity? A Panel Disaggregated Approach," Bangladesh Development Studies, Bangladesh Institute of Development Studies (BIDS), vol. 31(1-2), pages 25-55, March-Jun.
    • Handle: RePEc:ris:badest:0465
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    Cited by:

    1. Sahajdeep Kaur & Shah Krushali & C. G. Accamma & Namitha K Cheriyan, 2019. "Modeling the Impact of Political Risk Components on Major Macroeconomic Variables," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 9(9), pages 1032-1042, September.

    More about this item

    Keywords

    Political Risk; Purchasing Power Disparity; Panel Disaggregated Approach;
    All these keywords.

    JEL classification:

    • A10 - General Economics and Teaching - - General Economics - - - General

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