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An Empirical Investigation of Purchasing Power Parity for a Transition Economy - Cambodia

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  • Venus Khim-Sen Liew
  • Tuck Cheong Tang

Abstract

This study has found an empirical support of Purchasing Power Parity (PPP) theory for an East Asia transition economy – Cambodia. It is based on the results of cointegration among KHR/USD, Cambodia CPI, and world CPI over the monthly period May 2001-February 2009. This finding is useful for policy implications i.e. de-dollarization (and exchange rates) policy designs in Cambodia.

Suggested Citation

  • Venus Khim-Sen Liew & Tuck Cheong Tang, 2009. "An Empirical Investigation of Purchasing Power Parity for a Transition Economy - Cambodia," Monash Economics Working Papers 25-09, Monash University, Department of Economics.
  • Handle: RePEc:mos:moswps:2009-25
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    File URL: http://www.buseco.monash.edu.au/eco/research/papers/2009/2509empiricalliewtang.pdf
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    References listed on IDEAS

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    1. Kwiatkowski, Denis & Phillips, Peter C. B. & Schmidt, Peter & Shin, Yongcheol, 1992. "Testing the null hypothesis of stationarity against the alternative of a unit root : How sure are we that economic time series have a unit root?," Journal of Econometrics, Elsevier, vol. 54(1-3), pages 159-178.
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    3. Hatemi-J, Abdulnasser, 2002. "Fiscal policy in Sweden: effects of EMU criteria convergence," Economic Modelling, Elsevier, vol. 19(1), pages 121-136, January.
    4. Alan M. Taylor & Mark P. Taylor, 2004. "The Purchasing Power Parity Debate," Journal of Economic Perspectives, American Economic Association, vol. 18(4), pages 135-158, Fall.
    5. Mark Taylor, 2006. "Real exchange rates and Purchasing Power Parity: mean-reversion in economic thought," Applied Financial Economics, Taylor & Francis Journals, vol. 16(1-2), pages 1-17.
    6. Jean-François Hoarau, 2008. "Testing PPP for Central American real exchange rates. Evidence from new panel data stationary tests with structural breaks," Economics Bulletin, AccessEcon, vol. 6(21), pages 1-5.
    7. Jason Furman & Joseph E. Stiglitz, 1998. "Economic Crises: Evidence and Insights from East Asia," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(2), pages 1-136.
    8. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    9. Sazanami, Yoko & Yoshimura, Seiji, 1999. "Restructuring East Asian exchange rate regimes," Journal of Asian Economics, Elsevier, vol. 10(4), pages 509-523.
    10. Chinn, Menzie David & Dooley, Michael P., 1999. "International monetary arrangements in the Asia-Pacific before and after," Journal of Asian Economics, Elsevier, vol. 10(3), pages 361-384.
    11. Kiwon Kang, 2005. "Is Dollarization Good for Cambodia?," Global Economic Review, Taylor & Francis Journals, vol. 34(2), pages 201-211.
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    Cited by:

    1. Olalekan Bashir Aworinde, 2014. "Are Bilateral Real Exchange Rates Stationary? Empirical Evidence from Nigeria," Economics Bulletin, AccessEcon, vol. 34(1), pages 271-286.

    More about this item

    Keywords

    Cambodia; Dollarization; Exchange Rates; Purchasing Power Parity;

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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