Testing for PPP Using SADC Real Exchange Rates
AbstractThis 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 (ADF) test, nonlinear tests of nonstationarity, and Bayesian unit root tests, applied to ten SADC countries. The Bayesian tests were found to be biased in favour of a trend stationary model in all cases. It is argued that nonlinear 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 per cent and 5 per cent levels of significance.
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Bibliographic InfoPaper provided by University of Pretoria, Department of Economics in its series Working Papers with number 200822.
Length: 14 pages
Date of creation: Jun 2008
Date of revision:
Purchasing Power Parity; Nonlinear Nonstationarity Tests; Bayesian Unit Root Test;
Other versions of this item:
- C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- F31 - International Economics - - International Finance - - - Foreign Exchange
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-07-05 (All new papers)
- NEP-CBA-2008-07-05 (Central Banking)
- NEP-IFN-2008-07-05 (International Finance)
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- 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).
- 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,"
University of Finance and Management in Warsaw, vol. 7(1), March.
- Riane de Bruyn & Rangan Gupta & Lardo stander, 2011. "Testing the Monetary Model for Exchange Rate Determination in South Africa: Evidence from 101 Years of Data," Working Papers 201134, University of Pretoria, Department of Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Rangan Gupta).
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