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On the purchasing power parity for Latin-American countries

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  • Amor Divino, José Ângelo Costa do
  • Andrade, Joaquim Pinto de
  • Teles, Vladimir Kuhl

Abstract

The purpose of this paper is to test the hypothesis of long-run purchasing power parity (PPP) for all Latin American countries. These countries share similar economic history and contagious effects from currency crises, which might lead to comovements in their real exchange rates. New time series unit root tests found evidence of PPP 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 indicated stationary real exchange rates. Thus, there is convincing evidence that PPP holds for Latin-American countries in the post-1980 period.

Suggested Citation

  • Amor Divino, José Ângelo Costa do & Andrade, Joaquim Pinto de & Teles, Vladimir Kuhl, 2010. "On the purchasing power parity for Latin-American countries," Textos para discussão 227, FGV/EESP - Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil).
  • Handle: RePEc:fgv:eesptd:227
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    Cited by:

    1. 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.
    2. 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.
    3. 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.
    4. 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.
    5. 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.
    6. 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.
    7. 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.

    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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