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Half-Life Deviations from PPP in the SADC

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Author Info
Thabo Mokoena () (South African Reserve Bank, Pretoria)
Rangan Gupta () (Department of Economics, University of Pretoria)
Renee van Eyden () (Department of Economics, University of Pretoria)

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Abstract

This paper utilises various recently developed econometric methods to obtain better approximations to the half-life for real exchange rates of ten South African Development Community (SADC) countries and to generate confidence intervals for half-life deviations from the purchasing power parity (PPP). The robust methods of Stock (1991), Elliott and Stock (2001), and Hansen (1999) imply that point estimates of less than 36 months exist, making them compatible with PPP. However, the results of ADF and ADF-GLS tests render the SADC real exchange rates as nonstationary processes, a result that is patently at odds with mean-reversion, implying at the same time the possibility of infinite half-lives. Therefore the empirical results appearing in this paper do not convincingly resolve the half-life version of the PPP puzzle and leaves room for future research in the directions of non-parametric methods and median unbiased confidence intervals.

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Publisher Info
Paper provided by University of Pretoria, Department of Economics in its series Working Papers with number 200823.

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Length: 11 pages
Date of creation: Jul 2008
Date of revision:
Handle: RePEc:pre:wpaper:200823

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Postal: PRETORIA, 0002
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Web page: http://web.up.ac.za/default.asp?ipkCategoryID=40
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Related research
Keywords: PPP Half-life Real Exchange Rates

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Find related papers by JEL classification:
C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Hypothesis Testing
C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Statistical Simulation Methods
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data
F30 - International Economics - - International Finance - - - General
F31 - International Economics - - International Finance - - - Foreign Exchange

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Rangan Gupta & Emmanuel Ziramba, 2008. "Tax Evasion and Financial Repression: A Reconsideration Using Endogenous Growth Models," Working Papers 200808, University of Pretoria, Department of Economics.
  2. Rangan Gupta, 2004. "Costly State Monitoring and Reserve Requirements," Working papers 2004-33, University of Connecticut, Department of Economics, revised Jul 2005. [Downloadable!]
  3. Joseph H. Haslag & Jahyeong Koo, 1999. "Financial repression, financial development and economic growth," Working Papers 99-02, Federal Reserve Bank of Dallas. [Downloadable!]
  4. Rangan Gupta, 2005. "Tax Evasion and Financial Repression," Working papers 2005-34, University of Connecticut, Department of Economics, revised Jun 2007. [Downloadable!]
  5. Manoj Atolia, 2003. "An OLG of Tax Evasion with Public Capital," Working Papers wp2003_04_01, Department of Economics, Florida State University. [Downloadable!]
  6. Rangan Gupta, 2006. "Asymmetric Information, Tax Evasion and Alternative Instruments of Government Revenue," The Icfai Journal of Monetary Economics, Icfai Press, vol. 0(1), pages 75 - 89, February.
    Other versions:
  7. Christian Zimmermann, 1994. "Technology Innovations and the Volatility of Output: An International Perspective," Cahiers de recherche CREFE / CREFE Working Papers 34, CREFE, Université du Québec à Montréal. [Downloadable!]
  8. Been-Lon Chen & Yeong-Yuh Chiang & Ping Wang, 2000. "Credit Market Imperfections, Financial Activity and Economic Growth," Working Papers 0020, Department of Economics, Vanderbilt University. [Downloadable!]
  9. Joseph H. Haslag & Eric R. Young, 1998. "Money Creation, Reserve Requirements, and Seigniorage," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(3), pages 677-698, July. [Downloadable!] (restricted)
    Other versions:
  10. Haslag, Joseph H, 1998. "Monetary Policy, Banking, and Growth," Economic Inquiry, Oxford University Press, vol. 36(3), pages 489-500, July.
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  11. Rangan Gupta, 2008. "Currency Substitution and Financial Repression," Working Papers 200806, University of Pretoria, Department of Economics. [Downloadable!]
  12. Bhattacharya, Joydeep & Haslag, J., 2002. "On the use of the Inflation Tax when Non-Distortionary Taxes are Available," Staff General Research Papers 5247, Iowa State University, Department of Economics.
    Other versions:
  13. V.V. Chari & Larry E. Jones & Rodolfo E. Manuelli, 1995. "The growth effects of monetary policy," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 18-32. [Downloadable!]
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