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Nonlinear adjustment to purchasing power parity for ASEAN countries

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  • Chang, Tsangyao
  • Lee, Chia-Hao
  • Liu, Wen-Chi

Abstract

This study applies a simple and powerful nonlinear unit root test, proposed by Sollis (2009), to test the validity of long-run purchasing power parity (PPP) in a sample of ASEAN countries. The empirical results indicate that PPP only holds for three of these ASEAN countries studied, and the adjustment toward PPP is found to be nonlinear and asymmetric.

Suggested Citation

  • Chang, Tsangyao & Lee, Chia-Hao & Liu, Wen-Chi, 2012. "Nonlinear adjustment to purchasing power parity for ASEAN countries," Japan and the World Economy, Elsevier, vol. 24(4), pages 325-331.
    • Handle: RePEc:eee:japwor:v:24:y:2012:i:4:p:325-331
    DOI: 10.1016/j.japwor.2012.05.001
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    References listed on IDEAS

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    Cited by:

    1. Kai-Hua WANG & Chi-Wei SU & Hsu-Ling CHANG & Ji MA & Cristina IOVU, 2017. "Purchasing Power Parity In China: An Empirical Investigation Based On Bootstrap Rollingwindow Test," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 166-181, December.
    2. Zhang, Zhibai, 2014. "Is there a rule of thumb for absolute purchasing power parity to hold?," MPRA Paper 55338, University Library of Munich, Germany.
    3. Boršič Darja & Bekő Jani, 2018. "Purchasing power parity in ASEAN+3: an application of panel unit root tests," Croatian Review of Economic, Business and Social Statistics, Sciendo, vol. 4(1), pages 42-52, June.
    4. Andrew Phiri, 2017. "Nonlinear adjustment effects in the purchasing power parity," Journal of Economics and Econometrics, Economics and Econometrics Society, vol. 60(2), pages 14-38.
    5. Hiroshi Ono, 2014. "The government expenditure-economic growth relation in Japan: an analysis by using the ADL test for threshold cointegration," Applied Economics, Taylor & Francis Journals, vol. 46(28), pages 3523-3531, October.
    6. Hüseyin Şen & Ayşe Kaya & Savaş Kaptan & Metehan Cömert, 2019. "Interest rates, inflation, and exchange rates in fragile EMEs: A fresh look at the long-run interrelationships," Working Papers halshs-02095652, HAL.
    7. Aziza Syzdykova, 2018. "The Relationship between the Oil Price Shocks and the Stock Markets: The Example of Commonwealth of Independent States Countries," International Journal of Energy Economics and Policy, Econjournals, vol. 8(6), pages 161-166.
    8. Dimitriou, Dimitrios & Simos, Theodore, 2013. "Testing purchasing power parity for Japan and the US: A structural-break approach," Japan and the World Economy, Elsevier, vol. 28(C), pages 53-59.
    9. E. N. Gyamfi & E. F. Appiah, 2019. "Further evidence on the validity of purchasing power parity in selected African countries," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 43(2), pages 330-343, April.
    10. Mehmet Fatih Tra? & Esra Ball? & Çiler Sigeze, 2016. "Testing for Purchasing Power Parity for Selected CIS Countries Using the Sieve Bootstrap," Proceedings of International Academic Conferences 3506095, International Institute of Social and Economic Sciences.
    11. A. Oznur Umit, 2016. "Stationarity of Real Exchange Rates in the ¡°Fragile Five¡±: Analysis with Structural Breaks," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 8(4), pages 254-270, April.
    12. S. M. Woahid Murad & Mohammad Amzad Hossain, 2018. "The ASEAN experience of the purchasing power parity theory," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 4(1), pages 1-10, December.
    13. Bekő Jani & Boršič Darja, 2018. "Testing the Purchasing Power Parity Hypothesis: Case of ASEAN Economies," Naše gospodarstvo/Our economy, Sciendo, vol. 64(4), pages 74-85, December.

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    More about this item

    Keywords

    Purchasing power parity; ASEAN countries; Nonlinear unit root test; Asymmetric; AESTAR test;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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