The Validity of PPP Theory in ASEAN-Five: Another Look on Cointegration and Panel Data Analysis

Chee-Keong Choong (), Wai-Ching Poon (), Muzafar Shah Habibullah () and Zulkornain B. Yusop

International Trade from EconWPA

Abstract: The study aims to examine the robustness of different PPP models by applying different types of econometric techniques in ASEAN-Five economies from 1983:M1 to 2002:M9. Two versions of PPP theory have been estimated within Engle-Granger bivariate cointegration test, Johansen- Juselius multivariate cointegration model and panel data analysis proposed by Gujarati (2003). Based on the bivariate test, we found that PPP theory does not hold in the countries under concerned, while the validity of the PPP was confirmed if the multivariate procedure was applied. A supporting finding was documented when we analyse the robustness of the theory by looking on panel data analysis. Therefore, this study can be viewed as an additional work in providing justification for the theory of PPP in ASEAN-Five economies.

Keywords: PPP; cointegration; panel analysis; ASEAN (search for similar items in EconPapers)
JEL-codes: L31 N10 C22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ets, nep-ifn and nep-sea
Date: 2003-09-06
Note: Type of Document -
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpit:0309018

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