The validity of PPP: evidence from Lagrange multiplier unit root tests for ASEAN countries

ASLAN A.

ECONOMICS BULLETIN, cilt.30, ss.1433-1443, 2010 (Scopus) identifier identifier

  • Yayın Türü: Makale / Tam Makale
  • Cilt numarası: 30
  • Basım Tarihi: 2010
  • Dergi Adı: ECONOMICS BULLETIN
  • Derginin Tarandığı İndeksler: Scopus
  • Sayfa Sayıları: ss.1433-1443
  • Erciyes Üniversitesi Adresli: Hayır

Özet

The univariate and panel Lagrange Multiplier (LM) unit root tests with one and two structural breaks proposed by Lee and Strazicich (2003, 2004) which are considerably more powerful than traditional tests are employed to investigate whether the purchasing power parity (PPP) theory holds true for ASEAN countries by using both black market and official exchange rates. We find strong evidence in favour of long-run PPP for six ASEAN countries namely, Indonesia, Malaysia, Myanmar, Philippines, Singapore and Thailand.