Purchasing Power Parity in South Asia: A Panel Data Approach

Abdullah Noman

MPRA Paper from University Library of Munich, Germany

Abstract: The paper tests for PPP by investigating into the real exchange rates of seven South Asian countries. It employs two univariate unit root tests, namely, the ADF and the PP tests and two panel unit root tests, namely, the IPS and the CIPS tests. The univariate tests overwhelmingly fail to reject the unit root null. The IPS test also reinforces this result. The CIPS test that takes into account of cross section dependence produces mixed results. The findings, on the whole, fail to support stationarity of the South Asian real exchange rates and hence, PPP does not seem to be a valid proposition for the region.

JEL-codes: C23 F31 G15 (search for similar items in EconPapers)
Date: 2008-03-17
New Economics Papers: this item is included in nep-ifn and nep-sea
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:7824

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