PURCHASING POWER PARITY IN AFRICAN COUNTRIES: FURTHER EVIDENCE FROM FOURIER UNIT ROOT TESTS BASED ON LINEAR AND NONLINEAR MODELS

Yilanci V., Eris Z. A.

SOUTH AFRICAN JOURNAL OF ECONOMICS, vol.81, no.1, pp.20-34, 2013 (SSCI) identifier identifier

  • Publication Type: Article / Article
  • Volume: 81 Issue: 1
  • Publication Date: 2013
  • Doi Number: 10.1111/j.1813-6982.2012.01326.x
  • Journal Name: SOUTH AFRICAN JOURNAL OF ECONOMICS
  • Journal Indexes: Social Sciences Citation Index (SSCI), Scopus
  • Page Numbers: pp.20-34
  • Keywords: C22, F31, Africa, Fourier series, nonlinearity, purchasing power parity, EXCHANGE-RATE, INTERVENTION, MARKET, COINTEGRATION, STATIONARITY, ADJUSTMENT, RATES, HOLD, PPP
  • Çanakkale Onsekiz Mart University Affiliated: No

Abstract

This paper examines the validity of purchasing power parity hypothesis for 33 African countries using recently developed Fourier unit root tests by Christopoulos and Leon-Ledesma that account for the existence of multiple breaks in the real exchange rates. The results support the evidence of the PPP in 20 countries, showing that most of the real exchange rates in the selected countries are characterised by linear or nonlinear stationary around multiple temporary mean changes.