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Purchasing power parity (PPP) in developed countries: updated evidence from multivariate ARDL unit root test

Author

Listed:
  • Soo Khoon Goh

    (Centre for Policy Research, Universiti Sains Malaysia)

  • Yanru Yu

    (Centre for Policy Research, Universiti Sains Malaysia)

  • Chung Yan Sam

    (Centre for Policy Research, Universiti Sains Malaysia)

  • Tuck Cheong Tang

    (Universiti Malaya)

Abstract

This study re-examines the purchasing power parity (PPP) hypothesis for six developed countries, addressing the inconsistent evidence in the existing empirical literature. By applying a newly developed multiple autoregressive distributed lag (MARDL) unit root test, this study updates that both real and real effective exchange rates of the UK, Canada, Australia, Japan, Switzerland, and New Zealand (with the US as a covariate) are non-stationary, I(1) for 2000m1-2023m12, suggesting that the PPP does not hold.

Suggested Citation

  • Soo Khoon Goh & Yanru Yu & Chung Yan Sam & Tuck Cheong Tang, 2025. "Purchasing power parity (PPP) in developed countries: updated evidence from multivariate ARDL unit root test," Economics Bulletin, AccessEcon, vol. 45(2), pages 1074-1082.
    • Handle: RePEc:ebl:ecbull:eb-25-00225
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    JEL classification:

    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents

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