Purchasing Power Parity in African Countries: Further Evidence based on the ADL Test for Threshold Cointegration

Tsangyao Chang, Chia-hao Lee () and Guochen Pan ()
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Chia-hao Lee: Department of Finance, National Chung Hsing University
Guochen Pan: Department of Insurance and Actuarial Science, Wuhan University, China

Economics Bulletin, 2012, vol. 32, issue 1, 220-228

Abstract: 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 (search for similar items in EconPapers)
JEL-codes: C4 F3 (search for similar items in EconPapers)
Date: 2012-01-20
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