All Rights Reserved
AccessEcon LLC 2006, 2008.
Powered by MinhViet JSC

Ricky Chee Jiun Chia, Shiok Ye Lim and Sheue Li Ong
''Long-Run Validity of Purchasing Power Parity and Cointegration Analysis for Low Income African Countries ''
( 2014, Vol. 34 No.3 )
Studies on long-run purchasing power parity based on rank test for nonlinear cointegration is limited. Therefore, to formally examine if nonlinear purchasing power parity really exist in the selected low-income African countries, the current study revisits the long-run validity of purchasing power parity by using the rank tests advanced by Breitung (2011), which is not only capable in the detection of cointegration, but can further distinguish linear from nonlinear relationship if cointegration exists. In addition, this study also follows the suggestion by Liew et al. (2012) to solve the rank problem in testing the PPP hypothesis. Results from the analysis indicate that nominal exchange rates and relative prices are cointegrated in Burundi, Madagascar, Malawi and Uganda. However, further analysis only found the existence of nonlinear cointegration in Burundi.
Keywords: Nonlinearity, Cointegration, Rank Tests, Purchasing Power Parity
JEL: C1 - Econometric and Statistical Methods: General
Manuscript Received : Sep 23 2013 Manuscript Accepted : Jul 08 2014

  This abstract has been downloaded 1535 times                The Full PDF of this paper has been downloaded 154633 times