Purchasing Power Parity in South Asia: A Panel Data Approach
AbstractThe paper tests for PPP by investigating into the real exchange rates of seven South Asian countries. It employs two univariate unit root tests, namely, the ADF and the PP tests and two panel unit root tests, namely, the IPS and the CIPS tests. The univariate tests overwhelmingly fail to reject the unit root null. The IPS test also reinforces this result. The CIPS test that takes into account of cross section dependence produces mixed results. The findings, on the whole, fail to support stationarity of the South Asian real exchange rates and hence, PPP does not seem to be a valid proposition for the region.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 7824.
Date of creation: 17 Mar 2008
Date of revision:
Find related papers by JEL classification:
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- F31 - International Economics - - International Finance - - - Foreign Exchange
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-03-25 (All new papers)
- NEP-IFN-2008-03-25 (International Finance)
- NEP-SEA-2008-03-25 (South East Asia)
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