We found a match
Your institution may have rights to this item. Sign in to continue.
- Title
DO AFRICAN COUNTRIES MOVE ASYMMETRICALLY TOWARDS PURCHASING POWER PARITY?
- Authors
Holmes, Mark J.; Ping Wang
- Abstract
This paper investigates the possibility that the adjustment towards long-run relative purchasing power parity (PPP) is dependent upon the nature of deviations from PPP that are experienced. While existing studies involving developed and less developed countries often find against PPP having employed linear tests of non-stationarity or non-cointegration, we employ a new cointegration test, recently advocated by Enders and Siklos and Enders and Dibooglu, that tests for an asymmetric adjustment towards parity with respect to positive and negative deviations of the real exchange rate from its equilibrium value. Using a sample often African economies with data taken from the post-Bretton Woods floating exchange rate era, long-run PPP holds in eight of these cases if an explicit distinction is made between positive and negative deviations. Across the sample, we find variation in the type of asymmetry experienced and the roles played by price and nominal exchange rate adjustment.
- Subjects
PURCHASING power parity; FOREIGN exchange; CONSUMPTION (Economics); MONETARY policy; ECONOMIC indicators; ECONOMETRICS
- Publication
South African Journal of Economics, 2005, Vol 73, Issue 2, p292
- ISSN
0038-2280
- Publication type
Article
- DOI
10.1111/j.1813-6982.2005.00018.x