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The Validity of PPP Theory in ASEAN-Five: Another Look on Cointegration and Panel Data Analysis


  • Chee-Keong Choong

    (Universiti Tunku Abdul Rahman)

  • Wai-Ching Poon

    (TMultimedia University)

  • Muzafar Shah Habibullah

    (Universiti Putra Malaysia)

  • Zulkornain Yusop

    (Universiti Putra Malaysia)


The study aims to examine the robustness of different PPP models by applying different types of econometric techniques in ASEAN-Five economies from 1983:M1 to 2002:M9. Two versions of PPP theory have been estimated within Engle-Granger bivariate cointegration test, Johansen- Juselius multivariate cointegration model and panel data analysis proposed by Gujarati (2003). Based on the bivariate test, we found that PPP theory does not hold in the countries under concerned, while the validity of the PPP was confirmed if the multivariate procedure was applied. A supporting finding was documented when we analyse the robustness of the theory by looking on panel data analysis. Therefore, this study can be viewed as an additional work in providing justification for the theory of PPP in ASEAN-Five economies.

Suggested Citation

  • Chee-Keong Choong & Wai-Ching Poon & Muzafar Shah Habibullah & Zulkornain Yusop, 2003. "The Validity of PPP Theory in ASEAN-Five: Another Look on Cointegration and Panel Data Analysis," International Trade 0309018, EconWPA.
  • Handle: RePEc:wpa:wuwpit:0309018
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    References listed on IDEAS

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    Cited by:

    1. Armin Shmilovici & Yoav Kahiri & Irad Ben-Gal & Shmuel Hauser, 2009. "Measuring the Efficiency of the Intraday Forex Market with a Universal Data Compression Algorithm," Computational Economics, Springer;Society for Computational Economics, vol. 33(2), pages 131-154, March.

    More about this item


    PPP; cointegration; panel analysis; ASEAN;

    JEL classification:

    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship
    • N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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