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Non-linear PPP in South Asia and China

  • Shabbir Ahmad

    ()

    (School of Economics, IIIE, International Islamic University)

  • Abdul Rashid

    ()

    (of Economics, IIIE, International Islamic University,)

This study tests the purchasing power parity hypothesis for four South Asian economies and China by employing a recent nonlinear test of stationarity. Besides testing the CPI based PPP, we have also used PPI based real exchange rate in the analysis. The results indicate that nonlinear tests are more successful in validating PPP

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Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 6 (2008)
Issue (Month): 17 ()
Pages: 1-6

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Handle: RePEc:ebl:ecbull:eb-08f30041
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  1. Kapetanios, George & Shin, Yongcheol & Snell, Andy, 2003. "Testing for a unit root in the nonlinear STAR framework," Journal of Econometrics, Elsevier, vol. 112(2), pages 359-379, February.
  2. Sarno, Lucio & Taylor, Mark P, 2001. "Purchasing Power Parity and the Real Exchange Rate," CEPR Discussion Papers 2913, C.E.P.R. Discussion Papers.
  3. Venus Khim-sen Liew & Ahmad Zubaidi Baharumshah & Terence Tai-leung Chong, 2003. "Are Asian Real Exchange Rates Stationary?," International Finance 0307002, EconWPA, revised 01 Nov 2004.
  4. Lucio Sarno, 2005. "Viewpoint: Towards a solution to the puzzles in exchange rate economics: where do we stand?," Canadian Journal of Economics, Canadian Economics Association, vol. 38(3), pages 673-708, August.
  5. Kwiatkowski, Denis & Phillips, Peter C. B. & Schmidt, Peter & Shin, Yongcheol, 1992. "Testing the null hypothesis of stationarity against the alternative of a unit root : How sure are we that economic time series have a unit root?," Journal of Econometrics, Elsevier, vol. 54(1-3), pages 159-178.
  6. Ă–cal Nadir, 2000. "Nonlinear Models for U.K. Macroeconomic Time Series," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 4(3), pages 1-15, October.
  7. Zhou, Su, 2008. "Stationarity of Asian-Pacific real exchange rates," Economics Letters, Elsevier, vol. 98(1), pages 16-22, January.
  8. Michael, Panos & Nobay, A Robert & Peel, David A, 1997. "Transactions Costs and Nonlinear Adjustment in Real Exchange Rates: An Empirical Investigation," Journal of Political Economy, University of Chicago Press, vol. 105(4), pages 862-79, August.
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