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Purchasing Power Parity in Developing Countries: Evidence from Conventional and Fractional Cointegration Tests

This paper examines the long-run validity of purchasing power parity (PPP) for fourteen developing countries. The period examined is 1973:4 through 2002:8. The methods of Elliot, Rothemberg and Stock (1996), Kwiattkoski et al. (1992) and Geweke and Porter-Hudak (1983) are employed to detect the time...

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Main Authors: Arize, A. C., Malindretos, John, Grivoyannis, Elias C.
Format: Article
Language:English
Published: Universiti Utara Malaysia Press 2004
Subjects:
HG Finance
Online Access:http://repo.uum.edu.my/25110/1/IJBF%202%202004%2029%2043.pdf
http://repo.uum.edu.my/25110/
http://ijbf.uum.edu.my/index.php/previous-issues/133-the-international-journal-of-banking-and-finance-ijbf-vol-2-no-1-june-2004
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spelling my.uum.repo.251102018-11-01T01:22:58Z http://repo.uum.edu.my/25110/ Purchasing Power Parity in Developing Countries: Evidence from Conventional and Fractional Cointegration Tests Arize, A. C. Malindretos, John Grivoyannis, Elias C. HG Finance This paper examines the long-run validity of purchasing power parity (PPP) for fourteen developing countries. The period examined is 1973:4 through 2002:8. The methods of Elliot, Rothemberg and Stock (1996), Kwiattkoski et al. (1992) and Geweke and Porter-Hudak (1983) are employed to detect the time series properties of exchange rates and consumer price indices of these countries. We find that these variables are nonstationary. We then utilize these data to test the PPP using both conventional and fractional approaches. Estimates of the cointegrating relations are obtained using estimators suggested by Stock and Watson (1993) and Phillips and Hanson (1990), respectively. The results are consistent with the argument that, during the recent floating exchange-rate period, PPP holds well, at least in a weak form, in developing countries where the general price level movements overshadow the factors causing deviations from the PPP. Universiti Utara Malaysia Press 2004 Article PeerReviewed application/pdf en http://repo.uum.edu.my/25110/1/IJBF%202%202004%2029%2043.pdf Arize, A. C. and Malindretos, John and Grivoyannis, Elias C. (2004) Purchasing Power Parity in Developing Countries: Evidence from Conventional and Fractional Cointegration Tests. International Journal of Banking and Finance (IIJBF), 2. pp. 29-43. ISSN 1675-7227 http://ijbf.uum.edu.my/index.php/previous-issues/133-the-international-journal-of-banking-and-finance-ijbf-vol-2-no-1-june-2004
institution Universiti Utara Malaysia
building UUM Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Utara Malaysia
content_source UUM Institutionali Repository
url_provider http://repo.uum.edu.my/
language English
topic HG Finance
spellingShingle HG Finance
Arize, A. C.
Malindretos, John
Grivoyannis, Elias C.
Purchasing Power Parity in Developing Countries: Evidence from Conventional and Fractional Cointegration Tests
description This paper examines the long-run validity of purchasing power parity (PPP) for fourteen developing countries. The period examined is 1973:4 through 2002:8. The methods of Elliot, Rothemberg and Stock (1996), Kwiattkoski et al. (1992) and Geweke and Porter-Hudak (1983) are employed to detect the time series properties of exchange rates and consumer price indices of these countries. We find that these variables are nonstationary. We then utilize these data to test the PPP using both conventional and fractional approaches. Estimates of the cointegrating relations are obtained using estimators suggested by Stock and Watson (1993) and Phillips and Hanson (1990), respectively. The results are consistent with the argument that, during the recent floating exchange-rate period, PPP holds well, at least in a weak form, in developing countries where the general price level movements overshadow the factors causing deviations from the PPP.
format Article
author Arize, A. C.
Malindretos, John
Grivoyannis, Elias C.
author_facet Arize, A. C.
Malindretos, John
Grivoyannis, Elias C.
author_sort Arize, A. C.
title Purchasing Power Parity in Developing Countries: Evidence from Conventional and Fractional Cointegration Tests
title_short Purchasing Power Parity in Developing Countries: Evidence from Conventional and Fractional Cointegration Tests
title_full Purchasing Power Parity in Developing Countries: Evidence from Conventional and Fractional Cointegration Tests
title_fullStr Purchasing Power Parity in Developing Countries: Evidence from Conventional and Fractional Cointegration Tests
title_full_unstemmed Purchasing Power Parity in Developing Countries: Evidence from Conventional and Fractional Cointegration Tests
title_sort purchasing power parity in developing countries: evidence from conventional and fractional cointegration tests
publisher Universiti Utara Malaysia Press
publishDate 2004
url http://repo.uum.edu.my/25110/1/IJBF%202%202004%2029%2043.pdf
http://repo.uum.edu.my/25110/
http://ijbf.uum.edu.my/index.php/previous-issues/133-the-international-journal-of-banking-and-finance-ijbf-vol-2-no-1-june-2004
_version_ 1644284229600673792
score 13.211869

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