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2005•Munich Personal RePEc Archive (Ludwig Maximilian University of Munich)Open access

Purchasing Power Parity in Asian Economies: Further Evidence from Rank Tests for Cointegration

Venus Khim‐Sen Liew, Hock-Ann Lee, Kian−Ping Lim

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Abstract

The finding of nonlinear cointegration between Asian exchange rates with the corresponding relative prices and aggregate price levels based on Breitung's (2001) nonparametric rank tests reinforces previous validations of purchasing power parity (PPP) by the parametric testing procedures. Hence, the long-run Asian exchange rates are in equilibrium with the relevant fundamentals as suggested by the PPP hypothesis.

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The finding of nonlinear cointegration between Asian exchange rates with the corresponding relative prices and aggregate price levels based on Breitung's (2001) nonparametric rank tests reinforces previous validations of purchasing power parity (PPP) by the parametric testing procedures. Hence, the long-run Asian exchange rates are in equilibrium with the relevant fundamentals as suggested by the PPP hypothesis.

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Available abstract

The finding of nonlinear cointegration between Asian exchange rates with the corresponding relative prices and aggregate price levels based on Breitung's (2001) nonparametric rank tests reinforces previous validations of purchasing power parity (PPP) by the parametric testing procedures. Hence, the long-run Asian exchange rates are in equilibrium with the relevant fundamentals as suggested by the PPP hypothesis.

Key concepts: Purchasing power parity, Cointegration, Economics, Nonparametric statistics, Econometrics, Exchange rate, Rank (graph theory), Relative purchasing power parity

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