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Purchasing Power Parity in African Countries: Further Evidence based on the ADL Test for Threshold Cointegration

Author

Listed:
  • Tsangyao Chang

    () (Department of Finance, Feng Chia University, Taichung, Taiwan)

  • Chia-hao Lee

    () (Department of Finance, National Chung Hsing University)

  • Guochen Pan

    () (Department of Insurance and Actuarial Science, Wuhan University, China)

Abstract

In this study, we applied a newly-developed Autoregressive Distributed Lag (ADL) test for threshold cointegration, proposed by Li and Lee (2010) to test the validity of long-run purchasing power parity (PPP) for a sample of 18 African countries from January 1985 to September 2008. Empirical results indicate that PPP holds true for half of these countries studied, the long-run PPP adjustment process toward its equilibrium is asymmetric. Our results have important policy implications for these African countries under study.

Suggested Citation

  • Tsangyao Chang & Chia-hao Lee & Guochen Pan, 2012. "Purchasing Power Parity in African Countries: Further Evidence based on the ADL Test for Threshold Cointegration," Economics Bulletin, AccessEcon, vol. 32(1), pages 220-228.
  • Handle: RePEc:ebl:ecbull:eb-11-00406
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Purchasing Power Parity; African Countries; ADL Test; Threshold Cointegration; Asymmetric Adjustment;

    JEL classification:

    • F3 - International Economics - - International Finance
    • C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics

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