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Purchasing power parity in ASEAN-5 countries: revisit with cross-sectional dependence and structural breaks


  • Qaiser Munir
  • Sook Ching Kok
  • Hooi Hooi Lean
  • Tamara Teplova


This paper re-examines the purchasing power parity (PPP) hypothesis for a panel of ASEAN-5 countries. The panel unit root and cointegration tests, which incorporate cross-sectional dependence and multiple structural breaks, are innovatively used for testing the PPP hypothesis. We could not find evidence that supports the existence of a long-run equilibrium between the relative price ratio and the nominal exchange rate for the whole period. Nevertheless, there is evidence of a cointegrating relationship for the post-crisis period. Our finding implies that a flexible exchange rate regime is suitable for the individual ASEAN countries.

Suggested Citation

  • Qaiser Munir & Sook Ching Kok & Hooi Hooi Lean & Tamara Teplova, 2018. "Purchasing power parity in ASEAN-5 countries: revisit with cross-sectional dependence and structural breaks," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 11(3), pages 233-249, September.
  • Handle: RePEc:taf:macfem:v:11:y:2018:i:3:p:233-249
    DOI: 10.1080/17520843.2018.1505760

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