Purchasing power parity in transition countries: Sequential panel selection method

Huizhen He and Tsangyao Chang

Economic Modelling, 2013, vol. 35, issue C, 604-609

Abstract: This study applies the Sequential Panel Selection Method (SPSM), proposed by Chortareas and Kapetanios (2009) to test the validity of long-run purchasing power parity (PPP) for a sample of 14 transition countries, using real effective exchange rates, from 1994 to 2012 (for both monthly and quarterly data). SPSM classifies the whole panel into a group of stationary series and a group of non-stationary series. In doing so, we can clearly identify how many and which series in the panel are stationary processes. Empirical results from the SPSM using the Panel KSS unit root test (Ucar and Omay, 2009) with a Fourier function indicate that PPP holds true for most of these transition countries studied. Our results have important policy implications for these transition countries under study.

Keywords: Purchasing power parity; Real effective exchange rate; Transition countries; Sequential Panel Selection Method; Panel KSS unit root test; Fourier function; Policy implications (search for similar items in EconPapers)
JEL-codes: C22 F31 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:35:y:2013:i:c:p:604-609

DOI: 10.1016/j.econmod.2013.08.021

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