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On the Purchasing Power Parity for Latin-American Countries

Author

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  • Jose Angelo Divino
  • Vladimir Kuhl Teles
  • Joaquim Pinto de Andrade

Abstract

This paper tests the hypothesis of long-run purchasing power parity (PPP) for all Latin American countries. Those countries share characteristics as high inflation, nominal shocks, and trade openness which might have led to quicker adjustment in relative prices and contributed for PPP to hold. New time series unit root tests give evidence of stationary real exchange rates for the vast majority of countries. In the panel data framework, tests for the null of unit root, null of stationarity, and unit root under multiple structural breaks indicate that the pooled real exchange rate is stationary. Thus, the results provide convincing evidence that PPP holds in Latin-America in the post-1980 period.

Suggested Citation

  • Jose Angelo Divino & Vladimir Kuhl Teles & Joaquim Pinto de Andrade, 2009. "On the Purchasing Power Parity for Latin-American Countries," Journal of Applied Economics, Taylor & Francis Journals, vol. 12(1), pages 33-54, May.
    • Handle: RePEc:taf:recsxx:v:12:y:2009:i:1:p:33-54
    DOI: 10.1016/S1514-0326(09)60004-0
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    Cited by:

    1. Alejandro D. Jacobo & Simón Sosvilla‐Rivero, 2021. "An empirical examination of purchasing power parity: Argentina 1810–2016," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(2), pages 2064-2073, April.
    2. He, Huizhen & Chou, Ming Che & Chang, Tsangyao, 2014. "Purchasing power parity for 15 Latin American countries: Panel SURKSS test with a Fourier function," Economic Modelling, Elsevier, vol. 36(C), pages 37-43.
    3. Su, Chi-Wei & Tsangyao, Chang & Chang, Hsu-Ling, 2011. "Purchasing power parity for fifteen Latin American countries: Stationary test with a Fourier function," International Review of Economics & Finance, Elsevier, vol. 20(4), pages 839-845, October.
    4. Lyócsa, Štefan & Výrost, Tomáš & Baumöhl, Eduard, 2011. "Unit-root and stationarity testing with empirical application on industrial production of CEE-4 countries," MPRA Paper 29648, University Library of Munich, Germany.
    5. Erik Alencar de Figueiredo & André de Mattos Marques, 2013. "Testing absolute PPP hypothesis for twenty countries through the skeleton from a SETAR model- some new evidence," Série Textos para Discussão (Working Papers) 16, Programa de Pós-Graduação em Economia - PPGE, Universidade Federal da Paraíba.
    6. Chin-Ping King, 2012. "Half Life of the Real Exchange Rate: Evidence from the Nonlinear Approach in Emerging Economies," Journal of Economics and Management, College of Business, Feng Chia University, Taiwan, vol. 8(1), pages 1-23, January.
    7. Hem Basnet & Subhash Sharma, 2015. "Exchange rate movements and policy coordination in Latin America," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 39(4), pages 679-696, October.
    8. Wen Zhang & Hsu-Ling Chang & Chi-Wei Su, 2014. "Do real interest rates converge across Latin american countries?," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 13(2), pages 117-130, August.
    9. 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.

    More about this item

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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