Purchasing Power Parity in Some African Countries Using a Nonlinear Panel Unit Root Test
DOI:
https://doi.org/10.33423/jabe.v21i7.2549Keywords:
Business, Economics, Purchasing Power Parity, Unit Root Test, Real Exchange Rates, Non-Stationary, African Countries, Johansen Cointegration TestAbstract
This study investigates further whether the PPP holds between the US and some 22 African countries from 1st January 1980 to 31st December 2018. The results show that we cannot reject the null hypothesis of a unit root in the 14 series of KSS (2003) demeaned, 10 series of Kruse (2011) demeaned, and 20 series of ADF constant, thus series are non-stationary. Similarly, when de-trended of KSS (2003), detrended of Kruse (2011) and constant and trend of ADF tests were run, both linear and nonlinear unit root tests fail to reject null hypothesis almost all the series under study. The results seem to suggest that real exchange rates are non-stationary in these 22 African countries. The Johansen’s test result shows that deviations from PPP for 12 of 22 countries are persistent.
