Does Purchasing Power Parity Hold in African Less Developed Countries? Evidence from a Panel Data Unit Root Test

Released on by Mark Holmes
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  • Does Purchasing Power Parity Hold in African Less Developed Countries? Evidence from a Panel Data Unit Root Test Book Detail

  • Author : Mark Holmes
  • Release Date : 2000
  • Publisher :
  • Genre :
  • Pages : 0
  • ISBN 13 :
  • File Size : 6,6 MB
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Does Purchasing Power Parity Hold in African Less Developed Countries? Evidence from a Panel Data Unit Root Test by Mark Holmes PDF Summary

Book Description: This study tests for long-run relative purchasing power parity among a sample of 27 African less developed countries. For this purpose, a new test advocated by Im and co-workers is employed which allows one to test for unit roots in heterogeneous panel datasets. This is known as the t-bar test, by which purchasing power parity is confirmed or rejected on the basis of whether or not the average augmented Dickey-Fuller statistic based on demeaned data is significantly different from zero. Using quarterly data covering the period 1974-97, purchasing power parity is generally rejected using individual country unit root tests but support is found using the t-bar test. This suggests that low power problems in testing for purchasing power parity can be overcome using this panel data procedure. The findings also support the view that purchasing power parity is most likely to be found among high inflation less developed countries and that the half-life of a one-off random shock to parity is approximately six quarters. These results are generally confirmed for the 1960-73 period.

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Purchasing Power Parity in OECD Countries

Purchasing Power Parity in OECD Countries

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This paper investigates the validity of purchasing power parity (PPP) for 25 OECD countries by using a panel unit-root methodology. The procedure used here is t