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The Validity of PPP Theory in ASEAN-Five: Another Look on Cointegration and Panel Data Analysis

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Author Info

  • Chee-Keong Choong

    (Universiti Tunku Abdul Rahman)

  • Wai-Ching Poon

    (TMultimedia University)

  • Muzafar Shah Habibullah

    (Universiti Putra Malaysia)

  • Zulkornain Yusop

    (Universiti Putra Malaysia)

Abstract

The study aims to examine the robustness of different PPP models by applying different types of econometric techniques in ASEAN-Five economies from 1983:M1 to 2002:M9. Two versions of PPP theory have been estimated within Engle-Granger bivariate cointegration test, Johansen- Juselius multivariate cointegration model and panel data analysis proposed by Gujarati (2003). Based on the bivariate test, we found that PPP theory does not hold in the countries under concerned, while the validity of the PPP was confirmed if the multivariate procedure was applied. A supporting finding was documented when we analyse the robustness of the theory by looking on panel data analysis. Therefore, this study can be viewed as an additional work in providing justification for the theory of PPP in ASEAN-Five economies.

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Bibliographic Info

Paper provided by EconWPA in its series International Trade with number 0309018.

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Date of creation: 06 Sep 2003
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Handle: RePEc:wpa:wuwpit:0309018

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Keywords: PPP; cointegration; panel analysis; ASEAN;

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Cited by:
  1. Y. Kahiri & A. Shmilovici & S. Hauser, 2006. "Measuring the Efficiency of the Intraday Forex Market with a Universal Data Compression Algorithm," Computing in Economics and Finance 2006 256, Society for Computational Economics.

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