TESTING FOR PPP USING SADC REAL EXCHANGE RATES
Thabo M. Mokoena,
Rangan Gupta () and
Renee van Eyden ()
South African Journal of Economics, 2009, vol. 77, issue 3, 351-362
This paper attempts to provide evidence indicating that the purchasing power parity (PPP) puzzle is becoming less of a puzzle. It present the results of Augmented Dickey–Fuller test, non‐linear tests of non‐stationarity and Bayesian unit root tests, applied to 10 Southern African Development Community countries. The Bayesian tests were found to be biased in favour of a trend stationary model in all cases. It is argued that non‐linear approaches to exchange rate adjustments are likely to provide a firmer basis for inference and stronger support for the PPP in the long‐term. This is more so at 1 and 5% levels of significance.
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Persistent link: https://EconPapers.repec.org/RePEc:bla:sajeco:v:77:y:2009:i:3:p:351-362
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