Purchasing Power Parity Hypothesis in Developing Economies: Some Empirical Evidence from Sri Lanka

Guneratne Wickremasinghe

No 236, Econometric Society 2004 Australasian Meetings from Econometric Society

Abstract: The purchasing power parity (PPP) hypothesis has attracted a lot of attention from academics and policy-makers particularly, during the recent float. Most previous studies used data from the developed world. This study examines the validity of the PPP hypothesis using data during the recent float from Sri Lanka. In contrast to previous studies, we use unit root tests which take into account unknown means and trends in the real exchange rates as well as graphical techniques. Both these techniques overwhelmingly reject the empirical validity of the PPP hypothesis for Sri Lanka. The results from widely-used unit root tests, however, provide mixed evidence. We attribute these inconclusive results to the low power of the widely-used unit root tests and their inability to account for unknown trends and means in the real exchange rates

Keywords: Real exchange rates; Sri Lanka; Purchasing power parity; ERS tes (search for similar items in EconPapers)
JEL-codes: C22 F31 (search for similar items in EconPapers)
Date: 2004-08-11
New Economics Papers: this item is included in nep-ifn
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://repec.org/esAUSM04/up.14305.1077852630.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecm:ausm04:236

Access Statistics for this paper

More papers in Econometric Society 2004 Australasian Meetings from Econometric Society Contact information at EDIRC.
Bibliographic data for series maintained by Christopher F. Baum ().