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Purchasing Power Parity in South Asia: A Panel Data Approach

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  • Noman, Abdullah

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.

Suggested Citation

  • Noman, Abdullah, 2008. "Purchasing Power Parity in South Asia: A Panel Data Approach," MPRA Paper 7824, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:7824
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    File URL: https://mpra.ub.uni-muenchen.de/7824/1/MPRA_paper_7824.pdf
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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