A wavelet-based panel unit-root test in the presence of an unknown structural break and cross-sectional dependency, with an application of purchasing power parity theory in developing countries

Almasri, Abdullah; Månsson, Kristofer; Sjölander, Pär; Shukur, Ghazi

doi:10.1080/00036846.2016.1231908

Cited by 2 publications

(3 citation statements)

References 21 publications

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“…These results support the findings of Vo and Vo (2020), which also support the validity of PPP in number of currencies using wavelet technique. It also corroborates the findings of Almasri et al (2017) which has provided strong support for PPP in central American countries by using wavelet panel unit root test.…”

Section: Wavelet Resultssupporting

confidence: 88%

“…The estimated results have shown that inflation rates cause exchange rates in most of the countries in short run. Applying monthly panel data for the period 1970 to 2011, Almasri et al (2017) have investigated the validity of PPP in central American countries by using wavelet panel unit root test. The study has shown strong support for PPP in this developing region.…”

Section: Literature Reviewmentioning

confidence: 99%

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Inflation Differential Pass-Through to Exchange Rate: Some Evidence From Pakistan

Zakaria,

Tanveer,

Fida

et al. 2023

SAGE Open

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Using regression and wavelet coherence techniques this paper tries to probe the validity of purchasing power parity (PPP) in Pakistan. For this purpose, monthly data is collected for nominal exchange rate and consumer prices of Pakistan and its 23 major trading partners for the flexible exchange rate period 1982M1 to 2020M12. The regression results show that in 12 countries inflation differential significantly positively affect exchange rate. Similarly, Granger causality results reveal that inflation differential causes exchange rates in 12 countries. Wavelet coherency results indicate that there is significant co-movements between inflation differentials and exchange rates in varying time and frequency domains in all countries. These results indicate the partial validity of PPP in Pakistan. These results suggest that by reducing its inflation Pakistan can stabilize its exchange rates. JEL Classifications: C14, E31, F31

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Section: Wavelet Resultssupporting

confidence: 88%

Section: Literature Reviewmentioning

confidence: 99%

Inflation Differential Pass-Through to Exchange Rate: Some Evidence From Pakistan

Zakaria,

Tanveer,

Fida

et al. 2023

SAGE Open

View full text Add to dashboard Cite

show abstract

“…The purchasing power parity (PPP) theory explains the perfect relationship between the relative inflation rates between the two countries and their exchange rates. To be sure, the PPP theory states that the exchange rate balance will adjust to the magnitude of the difference in inflation rates between the two countries (Almasri et al, 2017). Although PPP remains a valuable concept, there is evidence of considerable deviation from the theory's implementation in the real world (Iyke & Odhiambo, 2017).…”

Section: Purchasing Power Paritymentioning

confidence: 99%

How Do Inflation Rate, BI Rate, and Balance of Trade Directly Affect IDR to USD Exchange Rate and Indirectly Affect IDX Composite Index in Initial Stage of Covid-19 Outbreak?

Winarko

Wahono²,

Yuniningsih³

et al. 2021

RWE

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This study is trying to fill the research gap by understanding how several important financial variables interplay and affect the macroeconomic indicators, especially in developing country like Indonesia during the financial crisis period caused by the unexpected and sudden Covid-19 pandemic outbreak. The purpose of this research is to determine the direct effect of the inflation rate, Bank Indonesia (BI) rate, and Balance of Trade on the movement of Indonesia Rupiah (IDR) currency stability against US Dollar (USD) and indirect impact to the Indonesia Stock Exchange (IDX) Composite index in Indonesia during the initial stage of the pandemic outbreak. To achieve the research objectives, this study uses the Rupiah exchange rate against USD and IDX Composite index as the dependent variables, while the Inflation rate (CPI), BI rate, and Balance of Trade as the independent variables. The quantitative methodology is used in this research by applying linear and multiple simple regression techniques. The results of this research show that the Inflation rate, BI rate, and Balance of Trade were significantly affecting the Rupiah exchange rate against the USD, and it found that the most dominant variable in this model was the BI rate. The Inflation rate and Balance of Trade partially had no direct significant influence toward the movement of the Rupiah exchange rate against the USD during the critical anticipation period of Covid-19 pandemic outbreak. Furthermore, Rupiah exchange rate against the USD gave a significant influence toward the IDX Composite index.

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A wavelet-based panel unit-root test in the presence of an unknown structural break and cross-sectional dependency, with an application of purchasing power parity theory in developing countries

Cited by 2 publications

References 21 publications

Inflation Differential Pass-Through to Exchange Rate: Some Evidence From Pakistan

Inflation Differential Pass-Through to Exchange Rate: Some Evidence From Pakistan

How Do Inflation Rate, BI Rate, and Balance of Trade Directly Affect IDR to USD Exchange Rate and Indirectly Affect IDX Composite Index in Initial Stage of Covid-19 Outbreak?

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