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1.
There are a number of studies that examine the purchasing power parity (PPP) hypothesis. The empirical findings from the extant literature for the PPP hypothesis are mixed. This article applies univariate and panel Lagrange Multiplier (LM) unit root tests with one and two structural breaks to real exchange rates for 15 Asian countries. The univariate LM unit root tests find evidence of PPP for two-thirds of the sample. The results from the panel LM unit root test support long-run PPP for the Asian countries in the sample. The results from the LM panel unit root tests differ from those of existing panel unit root tests of PPP for Asian countries that have not allowed for the existence of structural breaks.  相似文献   

2.
This article examines whether the purchasing power parity (PPP) theory holds or not for the economies in different developing regions located in Africa, Asia and Latin America. In order to investigate this issue, a nonlinear panel unit root test is used to determine if some or all of the real exchange rates in a panel follow a stationary exponential smooth transition autoregressive process. By applying the nonlinear panel unit root test, our results demonstrate an empirical support for the theory of PPP for the economies in developing regions.  相似文献   

3.
This study revisits purchasing power parity (PPP) theory for 20 African countries using panel asymmetric nonlinear unit root test proposed by Emirmahmutoglu and Omay (2014), through the sequential panel selection method of Chortareas and Kapetanios (2009). While standard panel unit root tests fail to support the PPP, the empirical results from panel asymmetric nonlinear unit root test do support the PPP. However, additional tests reveal that support in all 20 African countries is mostly due to stationarity of the real effective exchange rates of Ghana and Rwanda where the adjustment process towards equilibrium is nonlinear and asymmetric.  相似文献   

4.
The effect of the single currency on the Purchasing Power Parity (PPP) hypothesis is examined in this study for the 15 EU countries, vis a vis the US dollar, before and after the advent of the euro. Standard as well as nonlinear unit root tests are employed on the time series dimension. Unit root tests reject PPP and the highest half-lives are observed after the introduction of the single currency. Panel unit root (Pesaran, 2007) and stationarity tests (Hadri and Kurozumi, 2008) that take into account cross-sectional dependence are also estimated. The results remain inconclusive as panel stationarity tests fail to support PPP whereas panel unit root tests fail to reject PPP for the whole sample and for the period before the introduction of the single currency.  相似文献   

5.
In this study, we re-examine the PPP hypothesis in the light of the new developments in the unit root testing literature. The recent theoretical findings have pointed out that the real exchange rate series exhibit asymmetric nonlinear behavior. A unit root test applied to analyze the PPP hypothesis therefore, should also take into account this asymmetry inherent in the real exchange rate. Different unit root tests that consider the presence of these data features have been developed in the time series literature. However, a true attempt to test the PPP hypothesis should take a panel data approach. To this end, we propose a nonlinear heterogeneous panel unit root test where the alternative hypothesis allows for symmetric or asymmetric exponential smooth transition autoregressive nonlinearity and provide its finite sample properties. We apply our test to the real exchange rates of the 15 European Union countries against the US dollar. While the results of the linear and symmetric nonlinear heterogeneous panel unit root tests are against the PPP hypothesis, the asymmetric nonlinear heterogeneous panel test that we propose gives support for the PPP hypothesis as expected. Therefore, the conclusions drawn from the linear panel unit root tests or the nonlinear panel unit root tests that do not take asymmetry into account might be misleading.  相似文献   

6.
This study applies Panel Seemingly Unrelated Regressions (SUR) Kapetanios et al. (Kapetanios–Shin–Snell (KSS), SURKSS) tests, proposed by Wu and Lee (2009), to investigate the properties of long-run Purchasing Power Parity (PPP) in 15 African countries. The empirical results from the univariate unit root and panel based unit root tests indicate that PPP does not hold for these 15 countries under study. However, Panel SURKSS tests indicate that PPP is valid for four of these 15 countries. These results have important policy implications for these 15 African countries under study.  相似文献   

7.
This paper provides tests of Purchasing Power Parity (PPP) for members of the EU-27 not in the euro area, using multivariate and panel cointegration techniques, for the period since the introduction of the euro currency in 1999 until the end of 2009. The results indicate that long-run PPP holds in ten cases and that domestic prices or the nominal exchange rate is the main driver of the short-run adjustment to stationarity. These results are discussed in terms of monetary convergence in the long-run.  相似文献   

8.
In this paper we propose a number of nonlinear panel unit root tests that are robust to cross-sectional dependency. These tests may be used to test the null hypothesis of non-stationarity against the alternative that some or all of the time series in the system of equations follow a stationary exponential smooth transition autoregressive (ESTAR) process. In contrast to previous research we relax the assumption that the cross-correlation structure is driven by a common-factor and consider an endogenous correlation structure. Based on the size and power results from the Monte Carlo simulations we recommend using the Wald version of our cross-sectional dependent robust nonlinear panel unit root (CDR-NPU) method.Finally, in an empirical application we demonstrate that our more powerful nonlinear method, in contrast to previous methods, can provide support for PPP even in smaller samples. In consistency with the univariate tests in Bahmani-Oskooee et al. (2008) our CDR-NPU tests support the theory that less industrialized economies exhibit stronger and more distinct nonlinear adjustment patterns towards PPP.  相似文献   

9.
We examine long-run purchasing power parity (PPP) using panel data methods to test for unit roots in US dollar real exchange rates of 84 countries. We find stronger evidence of PPP in countries more open to trade, closer to the United States, with lower inflation and moderate nominal exchange rate volatility, and with similar economic growth rates as the United States. We also show that PPP holds for panels of European and Latin American countries, but not for African and Asian countries. Our findings demonstrate that country characteristics can help explain both adherence to and deviations from long-run PPP.  相似文献   

10.
This paper empirically tests the purchasing power parity (PPP) using panel unit root tests. We employ a battery of panel unit root tests: LM-bar statistic [Testing for unit roots in heterogeneous panels, Working paper, University of Cambridge] is employed to account for serially correlated errors. The statistic proposed by Breitung [Adv. Econom. 15 (2000) 161.] and the KPSS-based statistic of Hadri [Econ. J. 3 (2000) 148.] are also used. In addition, we also employ a SUR estimator to account for possible cross-sectional effect. Data of 45 economies from 1980 to 1999 are used to test the PPP hypothesis. We find that these estimators tend to get supportive results when the data frequency becomes lower, which substantially characterizes the long-run property of the PPP hypothesis.  相似文献   

11.
The PPP debate: Multiple breaks and cross-sectional dependence   总被引:1,自引:0,他引:1  
This study implements panel unit root PPP tests accommodating level and trend breaks and cross-sectional dependence. In the presence of breaks there is evidence of a currency and price index effect. Additionally accounting for cross-sectional dependence overturns support for PPP.  相似文献   

12.
This study revisits Purchasing Power Parity theory (PPP) in the 34 OECD countries during January 1994–August 2013. We use a new panel stationary test with both sharp breaks and smooth shifts, a novel approach to panel unit-root testing, proposed by Bahmani–Oskooee et al. (2014). The results indicate that the PPP holds in half of the 34 OECD countries. These results indicate the importance of proper modelling of both sharp breaks and smooth shifts in real effective exchange rate series of OECD countries.  相似文献   

13.
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) in a sample of 15 Latin American countries using monthly data spanning from December 1994 to February 2010. SPSM classifies the whole panel into a group of stationary and nonstationary 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 which accounts for any structural break in the data indicate that PPP holds in many of the Latin American countries studied.  相似文献   

14.
The long–run purchasing power parity (PPP) concept is empirically studied using the parallel market exchange rates of 17 African countries and employing the panel cointegration method. This approach is particularly useful when analysing African countries, which do not have long time–series. This paper presents results that support the weak–form of the long–run PPP hypothesis in Africa, which does not require a homogeneity restriction on prices.  相似文献   

15.
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.  相似文献   

16.
This paper examines whether, in addition to standard unit root and cointegration tests, panel approaches also produce test statistics behaving erratically when applied to tests for Purchasing Power Parity (PPP). We show that if appropriate tests (which are robust to cross‐sectional dependence) are used, any evidence of erratic behaviour disappears, and empirical support is found for PPP.  相似文献   

17.
This article tests for the validity of the Purchasing power parity (PPP) theory using both the black market and the official exchange rates for panels with cross sectional dependency. The test is conducted using a newly developed, nonlinear IV panel unit root test that properly handles cross-sectional dependency for thirty-seven developing countries. We find that the null of joint unit root hypothesis is rejected for the whole panel, using the black market exchange rate, and for sub-panels of African and high inflation countries, using either exchange rate. The black market-based real exchange rates are, therefore, shown to provide stronger evidence for the purchasing power parity theory than do the official rates. This finding is consistent with the observation that black market exchange rates better represent market forces and thus are more relevant when testing for the validity of the PPP theory in developing countries.  相似文献   

18.
This article presents three different unit root tests for panel data, the main objective is to find the level of internal integration market through the purchasing power parity (PPP) evidence, based in the Balassa–Samuelson approach. Thus, eight kinds of markets, as tradable and nontradable goods for 16 main Mexican cities during a 21 year period have been contrasted. While two tests showed the PPP validity for seven markets, the other rejected it. The results obtained moreover feed the present controversy about which test is most appropriate to test the PPP, as soon as it is highlighted new elements emerge to explain the half-life analysis.  相似文献   

19.
We use several popular tests to test the validity of the Purchasing Power Parity (PPP) hypothesis. In particular, we analyze four classes of tests??standard univariate unit root tests, co-integration, panel unit root tests, and unit root tests for nonlinear frameworks??for a dataset consisting of 20 bilateral exchange rates. Through this approach, we ascertain the effectiveness of each methodology in assessing the validity of PPP. Overall, our results suggest little evidence to support PPP. Among the conducted tests, the Panel Analysis of Nonstationarity in the Idiosyncratic and Common components (PANIC) provides the richest insights by disentangling the possible sources of non-stationarity of real exchange rates. The relevance of using price indices with different characteristics is also pinpointed.  相似文献   

20.
This paper empirically analyzes Purchasing Power Parity (PPP) among Japanese municipalities from 1990 to 2003. Using panel unit root tests including one that considers cross-sectional dependence in the data (e.g., [Moon, H. R. and Perron, B. (2004). Testing for a unit root in panels with dynamic factors. Journal of Econometrics, 112, 81–126.]), we find evidence in favor of PPP, confirming the stationarity of relative prices in Japan and thus the long-run co-movement of municipal prices. Furthermore, the half-life of a shock is found to be about 2 years, which is faster than that of the international PPP. As in the European and US studies, short-term deviations from PPP can be explained by income differentials and distance between cities.  相似文献   

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