Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

Does purchasing power parity hold in African less developed countries? Evidence from a panel data unit root test

Does purchasing power parity hold in African less developed countries? Evidence from a panel data... 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. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of African Economies Oxford University Press

Does purchasing power parity hold in African less developed countries? Evidence from a panel data unit root test

Holmes, MJ
Journal of African Economies , Volume 9 (1) – Mar 1, 2000
Download PDF
16 pages

Loading next page...
 
/lp/oxford-university-press/does-purchasing-power-parity-hold-in-african-less-developed-countries-nRyYTaxJ9R

References (0)

References for this paper are not available at this time. We will be adding them shortly, thank you for your patience.

Publisher
Oxford University Press
Copyright
Oxford University Press
ISSN
0963-8024
eISSN
1464-3723
Publisher site
See Article on Publisher Site

Abstract

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.

Journal

Journal of African Economies – Oxford University Press

Published: Mar 1, 2000

There are no references for this article.