Investigation of the nonlinear behaviour in real exchange rates in developing regions

This article examines whether the purchasing power parity (PPP) theory holds or not for the economies in different developing regions located in Africa, Asia and Latin America. In order to investigate this issue, a nonlinear panel unit root test is used to determine if some or all of the real exchan...

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Bibliographic Details
Published in:Applied economics letters 2018-01, Vol.25 (5), p.335-339
Main Authors: Karlsson, Hyunjoo Kim, Månsson, Kristofer, Sjölander, Pär
Format: Article
Language:English
Subjects:
Developing countries
Developing regions
Economic analysis
Economic models
Economic theory
Economics
ESTAR
Foreign exchange rates
LDCs
Longitudinal studies
Nationalekonomi
Panel data
Purchasing power parity
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Summary:This article examines whether the purchasing power parity (PPP) theory holds or not for the economies in different developing regions located in Africa, Asia and Latin America. In order to investigate this issue, a nonlinear panel unit root test is used to determine if some or all of the real exchange rates in a panel follow a stationary exponential smooth transition autoregressive process. By applying the nonlinear panel unit root test, our results demonstrate an empirical support for the theory of PPP for the economies in developing regions.
ISSN:1350-4851
1466-4291
1466-4291
DOI:10.1080/13504851.2017.1321830