Do African Countries Move Asymmetrically Towards Purchasing Power Parity?
This paper investigates the possibility that the adjustment towards long-run relative purchasing power parity (PPP) is dependent upon the nature of deviations from PPP that are experienced. While existing studies involving developed and less developed countries often find against PPP having employed linear tests of non-stationarity or non-cointegration, we employ a new cointegration test, recently advocated by Enders and Siklos and Enders and Dibooglu, that tests for an asymmetric adjustment towards parity with respect to positive and negative deviations of the real exchange rate from its equilibrium value. Using a sample often African economies with data taken from the post-Bretton Woods floating exchange rate era, long-run PPP holds in eight of these cases if an explicit distinction is made between positive and negative deviations. Across the sample, we find variation in the type of asymmetry experienced and the roles played by price and nominal exchange rate adjustment. Copyright 2005 Economic Society of South Africa.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 73 (2005)
Issue (Month): 2 (06)
|Contact details of provider:|| Postal: |
Web page: http://www.blackwellpublishing.com/journal.asp?ref=0038-2280Email:
More information through EDIRC
|Order Information:||Web: http://www.blackwellpublishing.com/subs.asp?ref=0038-2280|
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.:
- McNown, Robert & S. Wallace, Myles, 1989. "National price levels, purchasing power parity, and cointegration: a test of four high inflation economies," Journal of International Money and Finance, Elsevier, vol. 8(4), pages 533-545, December.
- Enders, Walter & Siklos, Pierre L, 2001.
"Cointegration and Threshold Adjustment,"
Journal of Business & Economic Statistics,
American Statistical Association, vol. 19(2), pages 166-76, April.
- Tom Doan, . "RATS programs to replicate Enders-Siklos(2001) JBES paper on threshold cointegration," Statistical Software Components RTZ00053, Boston College Department of Economics.
- Tom Doan, . "ENDERSIKLOS: RATS procedure to perform Enders-Siklos test for cointegration with threshold effect," Statistical Software Components RTS00064, Boston College Department of Economics.
- Connolly, Michael B & Taylor, Dean G, 1979. "Exchange Rate Changes and Neutralization: A Test of the Monetary Approach Applied to Developed and Developing Countries," Economica, London School of Economics and Political Science, vol. 46(183), pages 281-94, August.
- Mahdavi, Saeid & Zhou, Su, 1994. "Purchasing power parity in high-inflation countries: further evidence," Journal of Macroeconomics, Elsevier, vol. 16(3), pages 403-422.
- Paul Collier & Jan Willem Gunning, 1997.
"Explaining African economic performance,"
CSAE Working Paper Series
1997-02.2, Centre for the Study of African Economies, University of Oxford.
- Jakob Madsen & Bill Yang, 1998. "Asymmetric price adjustment in a menu-cost model," Journal of Economics, Springer, vol. 68(3), pages 295-309, October.
- Crownover, Collin & Pippenger, John & Steigerwald, Douglas G., 1996. "Testing for absolute purchasing power parity," Journal of International Money and Finance, Elsevier, vol. 15(5), pages 783-796, October.
- Bahmani-Oskooee, Mohsen & Miteza, Ilir, 2002. "Do nominal devaluations lead to real devaluations in LDCs?," Economics Letters, Elsevier, vol. 74(3), pages 385-391, February.
- Rhee, Wooheon & Rich, Robert W., 1995. "Inflation and the asymmetric effects of money on output fluctuations," Journal of Macroeconomics, Elsevier, vol. 17(4), pages 683-702.
- Cover, James Peery, 1992. "Asymmetric Effects of Positive and Negative Money-Supply Shocks," The Quarterly Journal of Economics, MIT Press, vol. 107(4), pages 1261-82, November.
- Peter Liu, 1992. "Purchasing power parity in Latin America: A co-integration analysis," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 128(4), pages 662-680, December.
- Jerry Coakley & Ana-Maria Fuertes, 2002. "Asymmetric dynamics in UK real interest rates," Applied Financial Economics, Taylor & Francis Journals, vol. 12(6), pages 379-387.
- Ramsey, J.B. & Rothman, P., 1993.
"Time Irreversibility and Business Cycle Asymmetry,"
93-39, C.V. Starr Center for Applied Economics, New York University.
- Randal J. Verbrugge, 1998. "Cross-Sectional and Longitudinal Inflation Asymmetries," Macroeconomics 9809018, EconWPA.
- Peter Montiel & Bijan B. Aghevli & Mohsin S. Khan, 1991. "Exchange Rate Policy in Developing Countries; Some Analytical Issues," IMF Occasional Papers 78, International Monetary Fund.
- Frenkel, Jacob A., 1978. "Purchasing power parity : Doctrinal perspective and evidence from the 1920s," Journal of International Economics, Elsevier, vol. 8(2), pages 169-191, May.
- Nagayasu, Jun, 2002. "Does the Long-Run PPP Hypothesis Hold for Africa? Evidence from a Panel Cointegration Study," Bulletin of Economic Research, Wiley Blackwell, vol. 54(2), pages 181-87, April.
- Karras, Georgios, 1996. "Are the Output Effects of Monetary Policy Asymmetric? Evidence from a Sample of European Countries," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(2), pages 267-78, May.
- Walter Enders & Selahattin Dibooglu, 2001. "Long-Run Purchasing Power Parity with Asymmetric Adjustment," Southern Economic Journal, Southern Economic Association, vol. 68(2), pages 433-445, October.
- Connolly, Michael & Taylor, Dean, 1976. "Adjustment to devaluation with money and nontraded goods," Journal of International Economics, Elsevier, vol. 6(3), pages 289-298, August.
- Romeo Bautista, 1981. "Exchange rate changes and LDC export performance under generalized currency floating," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 117(3), pages 443-468, September.
- Hakkio, Craig S., 1984. "A re-examination of purchasing power parity : A multi-country and multi-period study," Journal of International Economics, Elsevier, vol. 17(3-4), pages 265-277, November.
- Morgan, Theodore & Davis, Albert, 1982. "The Concomitants of Exchange-Rate Depreciation: Less Developed Countries, 1971-1973," Economic Development and Cultural Change, University of Chicago Press, vol. 31(1), pages 101-29, October.
- Enders, Walter & Granger, C. W. J., 1998.
"Unit Root Tests and Asymmetric Adjustment with an Example Using the Term Structure of Interest Rates,"
Staff General Research Papers
1388, Iowa State University, Department of Economics.
- Enders, Walter & Granger, Clive W J, 1998. "Unit-Root Tests and Asymmetric Adjustment with an Example Using the Term Structure of Interest Rates," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(3), pages 304-11, July.
- Tom Doan, . "RATS programs to replicate Enders/Granger JBES(1998)on threshold unit roots," Statistical Software Components RTZ00054, Boston College Department of Economics.
- Bela Balassa, 1964. "The Purchasing-Power Parity Doctrine: A Reappraisal," Journal of Political Economy, University of Chicago Press, vol. 72, pages 584.
- Sarantis, Nicholas, 1999. "Modeling non-linearities in real effective exchange rates," Journal of International Money and Finance, Elsevier, vol. 18(1), pages 27-45, January.
When requesting a correction, please mention this item's handle: RePEc:bla:sajeco:v:73:y:2005:i:2:p:292-301. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.