Testing For Ppp Using Sadc Real Exchange Rates
This 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 test, non-linear tests of non-stationarity and Bayesian unit root tests, applied to 10 Southern African Development Community countries. The Bayesian tests were found to be biased in favour of a trend stationary model in all cases. It is argued that non-linear 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 and 5% levels of significance. Copyright (c) 2009 The Authors. Journal compilation (c) 2009 Economic Society of South Africa.
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Volume (Year): 77 (2009)
Issue (Month): 3 (09)
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