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Tsangyao Chang, Chia-hao Lee and Guochen Pan
''Purchasing Power Parity in African Countries: Further Evidence based on the ADL Test for Threshold Cointegration''
( 2012, Vol. 32 No.1 )
In this study, we applied a newly-developed Autoregressive Distributed Lag (ADL) test for threshold cointegration, proposed by Li and Lee (2010) to test the validity of long-run purchasing power parity (PPP) for a sample of 18 African countries from January 1985 to September 2008. Empirical results indicate that PPP holds true for half of these countries studied, the long-run PPP adjustment process toward its equilibrium is asymmetric. Our results have important policy implications for these African countries under study.
Keywords: Purchasing Power Parity, African Countries, ADL Test, Threshold Cointegration, Asymmetric Adjustment
JEL: F3 - International Finance: General
C4 - Econometric and Statistical Methods: Special Topics
Manuscript Received : Jun 13 2011 Manuscript Accepted : Jan 20 2012

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