Purchasing power parity in high-inflation countries: further evidence

Mahdavi, Saeid; Zhou, Shuhua

doi:10.1016/0164-0704(94)90014-0

Cited by 85 publications

(53 citation statements)

References 20 publications

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“…Many of African countries experience double-digit inflation in the last two decades, and the high inflation countries tend to favor the PPP hypothesis. These results clearly qualify the earlier findings of Liu (1992), Mahdavi and Zhou (1994), and others that PPP is most likely to hold in the case of high inflation countries. The major policy implication that emerges from this study is that PPP can be used to determine the equilibrium exchange rate for these six African countries.…”

Section: Data and Empirical Resultssupporting

confidence: 77%

Threshold effects in purchasing power parity for African Countries

Yu-Shao¹,

Liu²,

Mengnan³

et al. 2011

Afr. J. Bus. Manage.

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This study applies non-linear threshold unit-root test to assess the non-stationary properties of the real exchange rate for twenty African countries. We found that non-linear threshold unit-root test has higher power than linear method. As suggested by Caner and Hansen (2001), the true data generating process of exchange rate is a stationary non-linear process. We examine the validity of PPP from the non-linear point of view and provide robust evidence clearly indicating that purchasing power parity (PPP) holds true for six countries, namely; Egypt, Ethiopia, Gambia, Malawi, Seychelles and South Africa. Our findings point out their exchange rate adjustment is mean reversion towards PPP equilibrium values in a non-linear way.

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Section: Data and Empirical Resultssupporting

confidence: 77%

Threshold effects in purchasing power parity for African Countries

Yu-Shao¹,

Liu²,

Mengnan³

et al. 2011

Afr. J. Bus. Manage.

View full text Add to dashboard Cite

show abstract

“…6 Depending on national data availability, quarterly data for the period 1973Q2-2005Q4 provides a sample of size of up to 130 observations on each series for each country where the use of quarterly data is dictated by data availability across this large sample. The start date of 1973 is consistent with Mahdavi and Zhou (1994) and Holmes (2001) in their investigations of PPP in LDCs.…”

Section: Data and Resultsmentioning

confidence: 71%

“…Evidence on PPP for LDCs has led to generally mixed conclusions regarding its validity [see, inter alia, McNown and Wallace (1989), Liu (1992), Bahmani-Oskooee (1993), Mahdavi and Zhou (1994)]. 3 However, a view emerges that evidence in favor of PPP is stronger among the high inflation LDCs.…”

Section: Recent Literaturementioning

confidence: 97%

“…Each country is characterised by distinct periods where a stationary real exchange rate, or stationarity with a faster speed of adjustment, is the most likely. The noticeable periods are Argentina (1973-1992-2004), Brazil (1989-1992-2003), Chile (1973-1976, 1982and 1985), Ecuador (1982-1989, 1992-1994and 1999), Uruguay (1973-1978, 1983-1985-2003 and Venezuela (1988Venezuela ( -1990Venezuela ( , 1994Venezuela ( -1995Venezuela ( , 1996Venezuela ( -1997Venezuela ( , and 2002Venezuela ( -2005. Many of these periods encompass episodes of substantial devaluation of the nominal exchange rate.…”

Section: Ms-adf Model I (As Represented By Eqs 3 and 4) That Is Charmentioning

confidence: 99%

“…However, Frenkel (1978) suggests that PPP holds during periods of high inflation. 4 Mahdavi and Zhou (1994) apply the Johansen technique to investigate PPP in a sample of LDCs using quarterly data for 1973Q2 onwards. They conclude that incidences of PPP are more frequently observed among high inflation countries.…”

Section: Recent Literaturementioning

confidence: 99%

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