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Mohsen Bahmani-Oskooee and Abera Gelan
 
''Testing the PPP in the non-linear STAR Framework: Evidence from Africa''
( 2006, Vol. 6 No.17 )
 
 
Since its introduction in 2003, a new unit-root test that incorporates non-linearity in mean reverting process of a time series variable has gained momentum in testing the Purchasing Power Parity (PPP) theory. A few studies have applied the new test to the real bilateral exchange rates and have shown that it supports the PPP more often than the standard ADF test. In this paper we apply the new test as well as the standard ADF test not to real bilateral exchange rates but to real effective exchange rates of 21 African nations and show that indeed, the PPP is validated in 11 out of 21 African countries.
 
 
Keywords:
JEL: F3 - International Finance: General
F3 - International Finance: General
 
Manuscript Received : Aug 11 2006 Manuscript Accepted : Dec 28 2006

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