Purchasing power parity in ASEAN-5 countries: revisit with cross-sectional dependence and structural breaks
Faculty / School
Faculty of Business Administration (FBA)
Department of Economics
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Macroeconomics and Finance in Emerging Market Economies
Econometrics | Economics | Finance
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.
HJRS - Y Category, Scopus, Web of Science - Emerging Sources Citation Index (ESCI)
Munir, Q., Kok, S. C., Lean, H. H., & Teplova, T. (2018). Purchasing power parity in ASEAN-5 countries: revisit with cross-sectional dependence and structural breaks. Macroeconomics and Finance in Emerging Market Economies, 11 (3), 233-249. Retrieved from https://ir.iba.edu.pk/faculty-research-articles/48