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Purchasing power parity for 15 Latin American countries: Panel SURKSS test with a Fourier function

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  • He, Huizhen
  • Chou, Ming Che
  • Chang, Tsangyao

Abstract

This study applies Panel SURKSS test with a Fourier function to investigate the properties of long-run purchasing power parity (PPP) in fifteen Latin American countries over the period of December 1994 to February 2010. The empirical results from the univariate unit root and panel-based unit root tests indicate that PPP does not hold for these fifteen countries under study. However, results from the Panel SURKSS test with a Fourier function indicate that PPP is valid for these fifteen countries, with the exception of Honduras. Our results highlight the importance of incorporating both nonlinearities and structural breaks when testing the validity of long-run PPP. These results have important policy implications for these fifteen Latin American countries under study.

Suggested Citation

  • He, Huizhen & Chou, Ming Che & Chang, Tsangyao, 2014. "Purchasing power parity for 15 Latin American countries: Panel SURKSS test with a Fourier function," Economic Modelling, Elsevier, vol. 36(C), pages 37-43.
    • Handle: RePEc:eee:ecmode:v:36:y:2014:i:c:p:37-43
    DOI: 10.1016/j.econmod.2013.09.012
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    5. Si Mohammed, Kamel & Chérif touil, Noreddine & Maliki, Samir, 2015. "An Empirical Test of Purchasing Power Parity of the Algerian Exchange Rate: Evidence from Panel Dynamic," MPRA Paper 75285, University Library of Munich, Germany.
    6. Shu‐kam Lee & Paul Kwok‐ching Shum & Kai‐yin Woo, 2024. "Tests of goods market integration between China and African BRI countries," International Studies of Economics, John Wiley & Sons, vol. 19(2), pages 223-246, June.
    7. Dinçer Afat & Michael Frömmel, 2020. "An Alternative Version of Purchasing Power Parity," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 25(4), pages 511-517, October.
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    More about this item

    Keywords

    Purchasing power parity; Panel SURKSS test with a Fourier function; Latin American countries;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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