Purchasing power parity in ASEAN-5 countries: revisit with cross-sectional dependence and structural breaks

Author Affiliation

Qaiser Munir is Associate Professor at Institute of Business Administration (IBA), Karachi

Faculty / School

Faculty of Business Administration (FBA)

Department

Department of Economics

Was this content written or created while at IBA?

Yes

Document Type

Article

Source Publication

Macroeconomics and Finance in Emerging Market Economies

ISSN

1752-0843

Disciplines

Econometrics | Economics | Finance

Abstract

This paper re-examines the purchasing power parity (PPP) hypothesis for a panel of ASEAN-5 countries. The panel unit root and cointegration tests, which incorporate cross-sectional dependence and multiple structural breaks, are innovatively used for testing the PPP hypothesis. We could not find evidence that supports the existence of a long-run equilibrium between the relative price ratio and the nominal exchange rate for the whole period. Nevertheless, there is evidence of a cointegrating relationship for the post-crisis period. Our finding implies that a flexible exchange rate regime is suitable for the individual ASEAN countries.

Indexing Information

HJRS - Y Category, Scopus, Web of Science - Emerging Sources Citation Index (ESCI)

Publication Status

Published

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