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Revisiting purchasing power parity for 18 African countries: sequential panel selection method

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  • Guochen Pan
  • Tsangyao Chang
  • Chia-Hao Lee
  • Wen-Chi Liu

Abstract

This study applies the Sequential Panel Selection Method (SPSM) proposed by Chortareas and Kapetanios (2009) to test the validity of the long-run Purchasing Power Parity (PPP) for a sample of 18 African countries over the period January 1985 to September 2008. SPSM classifies the whole panel into a group of stationary series and a group of nonstationary series. In doing so, we can clearly identify how many and which series in the panel are stationary processes. Empirical results indicate that the PPP holds true for only four of these African countries studied. Our results have important policy implications for these African countries under study.

Suggested Citation

  • Guochen Pan & Tsangyao Chang & Chia-Hao Lee & Wen-Chi Liu, 2012. "Revisiting purchasing power parity for 18 African countries: sequential panel selection method," Applied Economics Letters, Taylor & Francis Journals, vol. 19(9), pages 877-881, June.
    • Handle: RePEc:taf:apeclt:v:19:y:2012:i:9:p:877-881
    DOI: 10.1080/13504851.2011.607117
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    1. E. N. Gyamfi & E. F. Appiah, 2019. "Further evidence on the validity of purchasing power parity in selected African countries," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 43(2), pages 330-343, April.

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