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A non-parametric cointegration test of purchasing power parity: the case of Malaysia

This study employs the Johansen and Juselius (1990) cointegration test and the recently proposed Bierens (1997) nonparametric cointegration methodology to test the purchasing power parity (PPP) hypothesis for the Malaysian economies, with respect to her major trading partners- the United States,...

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Main Authors: Lee, Hock Ann, Lim, Kian Ping, Azali Muhammad
Format: Article
Language:English
Published: Institute for Development Studies 2004
Subjects:
HG Finance
Online Access:https://eprints.ums.edu.my/id/eprint/18782/1/A%20non.pdf
https://eprints.ums.edu.my/id/eprint/18782/
http://www.ums.edu.my/fpep/files/16_ECO_2003.pdf
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spelling my.ums.eprints.187822018-06-07T01:09:04Z https://eprints.ums.edu.my/id/eprint/18782/ A non-parametric cointegration test of purchasing power parity: the case of Malaysia Lee, Hock Ann Lim, Kian Ping Azali Muhammad HG Finance This study employs the Johansen and Juselius (1990) cointegration test and the recently proposed Bierens (1997) nonparametric cointegration methodology to test the purchasing power parity (PPP) hypothesis for the Malaysian economies, with respect to her major trading partners- the United States, Japan and Singapore. The Bierens’s non-parametric cointegration method is utilized in views of the superiority of non-parametric method at detecting cointegration when the data generating process is non-linear. Using the Johansen and Juselius cointegration approach, the evidence does not support the PPP proposition for all cases under investigate. Further analysis using the Bierens’s method, however, provides strong support for the PPP hypothesis for the Malaysian economies, with respect to U.S., Japan and Singapore. Since the Bierens’s method allows for non-linearity in the data generating process, the discrepancy between the findings from both techniques is interpreted as a consequence of significant non-linearity in the real exchange rate adjustment to PPP. Institute for Development Studies 2004 Article PeerReviewed text en https://eprints.ums.edu.my/id/eprint/18782/1/A%20non.pdf Lee, Hock Ann and Lim, Kian Ping and Azali Muhammad (2004) A non-parametric cointegration test of purchasing power parity: the case of Malaysia. Borneo Review, 14 (1&2). pp. 157-165. http://www.ums.edu.my/fpep/files/16_ECO_2003.pdf
institution Universiti Malaysia Sabah
building UMS Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Malaysia Sabah
content_source UMS Institutional Repository
url_provider http://eprints.ums.edu.my/
language English
topic HG Finance
spellingShingle HG Finance
Lee, Hock Ann
Lim, Kian Ping
Azali Muhammad
A non-parametric cointegration test of purchasing power parity: the case of Malaysia
description This study employs the Johansen and Juselius (1990) cointegration test and the recently proposed Bierens (1997) nonparametric cointegration methodology to test the purchasing power parity (PPP) hypothesis for the Malaysian economies, with respect to her major trading partners- the United States, Japan and Singapore. The Bierens’s non-parametric cointegration method is utilized in views of the superiority of non-parametric method at detecting cointegration when the data generating process is non-linear. Using the Johansen and Juselius cointegration approach, the evidence does not support the PPP proposition for all cases under investigate. Further analysis using the Bierens’s method, however, provides strong support for the PPP hypothesis for the Malaysian economies, with respect to U.S., Japan and Singapore. Since the Bierens’s method allows for non-linearity in the data generating process, the discrepancy between the findings from both techniques is interpreted as a consequence of significant non-linearity in the real exchange rate adjustment to PPP.
format Article
author Lee, Hock Ann
Lim, Kian Ping
Azali Muhammad
author_facet Lee, Hock Ann
Lim, Kian Ping
Azali Muhammad
author_sort Lee, Hock Ann
title A non-parametric cointegration test of purchasing power parity: the case of Malaysia
title_short A non-parametric cointegration test of purchasing power parity: the case of Malaysia
title_full A non-parametric cointegration test of purchasing power parity: the case of Malaysia
title_fullStr A non-parametric cointegration test of purchasing power parity: the case of Malaysia
title_full_unstemmed A non-parametric cointegration test of purchasing power parity: the case of Malaysia
title_sort non-parametric cointegration test of purchasing power parity: the case of malaysia
publisher Institute for Development Studies
publishDate 2004
url https://eprints.ums.edu.my/id/eprint/18782/1/A%20non.pdf
https://eprints.ums.edu.my/id/eprint/18782/
http://www.ums.edu.my/fpep/files/16_ECO_2003.pdf
_version_ 1760229492505182208
score 13.244367

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