IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Do African Countries Move Asymmetrically Towards Purchasing Power Parity?

  • MARK J. HOLMES
  • PING WANG

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.

File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1813-6982.2005.00018.x
File Function: link to full text
Download Restriction: Access to full text is restricted to subscribers.

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.

Article provided by Economic Society of South Africa in its journal South African Journal of Economics.

Volume (Year): 73 (2005)
Issue (Month): 2 (06)
Pages: 292-301

as
in new window

Handle: RePEc:bla:sajeco:v:73:y:2005:i:2:p:292-301
Contact details of provider: Postal: PO Box 929, 0001 Pretoria
Web page: http://www.blackwellpublishing.com/journal.asp?ref=0038-2280
Email:


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.:

as in new window
  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. Ramsey, J.B. & Rothman, P., 1993. "Time Irreversibility and Business Cycle Asymmetry," Working Papers 93-39, C.V. Starr Center for Applied Economics, New York University.
  6. Jan Willem Gunning & Paul Collier, 1999. "Explaining African Economic Performance," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 64-111, March.
  7. 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.
  8. 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.
  9. Jakob Madsen & Bill Yang, 1998. "Asymmetric price adjustment in a menu-cost model," Journal of Economics, Springer, vol. 68(3), pages 295-309, October.
  10. 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.
  11. Mahdavi, Saeid & Zhou, Su, 1994. "Purchasing power parity in high-inflation countries: further evidence," Journal of Macroeconomics, Elsevier, vol. 16(3), pages 403-422.
  12. Bela Balassa, 1964. "The Purchasing-Power Parity Doctrine: A Reappraisal," Journal of Political Economy, University of Chicago Press, vol. 72, pages 584.
  13. 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.
  14. 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.
  15. 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.
  16. 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.
  17. Randal J. Verbrugge, 1998. "Cross-Sectional and Longitudinal Inflation Asymmetries," Macroeconomics 9809018, EconWPA.
  18. 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.
  19. 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.
  20. 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.
  21. 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.
  22. 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.
  23. 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.
  24. 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.
  25. 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.
  26. 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.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

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 you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.