International journal of

ADVANCED AND APPLIED SCIENCES

EISSN: 2313-3724, Print ISSN:2313-626X

Frequency: 12
line decor
  
line decor

 Volume 4, Issue 11 (November 2017), Pages: 155-159

----------------------------------------------

 Original Research Paper

 Title: Testing for purchasing power parity for ASEAN-5 using asymmetric cointegration tests

 Author(s): Niri Martha Choji 1, 2, *, Siok Kun Sek 2

 Affiliation(s):

 1Department of Mathematics, Plateau State University, Bokkos, Nigeria
 2School of Mathematical Sciences, Universiti Sains Malaysia, 11800 Minden, Penang, Malaysia

 https://doi.org/10.21833/ijaas.2017.011.025

 Full Text - PDF          XML

Abstract:

This paper tries to examine if purchasing power parity exists in Indonesia, Malaysia, Philippines, Singapore, and Thailand. To this end, we conduct a nonlinear asymmetric cointegration approach on testing for the existence of purchasing power parity (PPP) in ASEAN-5 countries using the threshold cointegration tests (TAR and MTAR). Based on Monthly data from 1996 to 2016, results of the threshold cointegration tests revealed evidence of long run PPP with asymmetric adjustment in Philippines and Thailand. However, PPP does not hold in Indonesia, Malaysia and Singapore, and the adjustment process in these countries is symmetric. 

 © 2017 The Authors. Published by IASE.

 This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).

 Keywords: Purchasing power parity, Asymmetric adjustment, Threshold autoregressive (TAR), Model momentum threshold  autoregressive (MTAR)

 Article History: Received 20 March 2017, Received in revised form 25 September 2017, Accepted 26 September 2017

 Digital Object Identifier: 

 https://doi.org/10.21833/ijaas.2017.011.025

 Citation:

 Choji NM and Sek SK (2017). Testing for purchasing power parity for ASEAN-5 using asymmetric cointegration tests. International Journal of Advanced and Applied Sciences, 4(11): 155-159

 Permanent Link:

 http://www.science-gate.com/IJAAS/V4I11/Choji.html

----------------------------------------------

 References (16)

  1. Bahmani-Oskooee M, Chang T, and Lee KC (2016). Panel asymmetric nonlinear unit root test and PPP in Africa. Applied Economics Letters, 23(8): 554-558. https://doi.org/10.1080/13504851.2015.1088132 
  2. Baum CF, Barkoulas JT, and Caglayan M (2001). Nonlinear adjustment to purchasing power parity in the post-Bretton Woods era. Journal of International Money and Finance, 20(3): 379-399. https://doi.org/10.1016/S0261-5606(00)00043-7 
  3. Beirne J (2010). International exchange rate dynamics and purchasing power parity. Ph.D. Dissertation, Brunel University, UK.     
  4. Chan KS (1993). Consistency and limiting distribution of the least squares estimator of a threshold autoregressive model. The Annals of Statistics, 21(1): 520-533. https://doi.org/10.1214/aos/1176349040 
  5. Chen JE, Lee CY, and Goh LT (2013). Exchange rate and oil price: Asymmetric adjustment. Applied Economic Letters, 20(10): 987-990. https://doi.org/10.1080/13504851.2013.770118 
  6. Enders W and Granger CWJ (1998). Unit-root tests and asymmetric adjustment with an example using the term structure of interest rates unit-rsst tests and asymmetric adjustment. Journal of Business & Economic Statistics, 16(3): 304-311.     
  7. Enders W and Siklos PL (2001). Cointegration and threshold adjustment. Journal of Business & Economic Statistics, 19(2): 166-176. https://doi.org/10.1198/073500101316970395 
  8. Haughton AY and Iglesias EM (2012). Interest rate volatility, asymmetric interest rates pass through and the monetary transmission mechanism in the Caribbean compared to US and Asia. Economic Modelling, 29(6): 2071-2089. https://doi.org/10.1016/j.econmod.2012.06.034 
  9. Kapetanios G, Shin Y, and Snell A (2003). Testing for a unit root in the nonlinear STAR framework. Journal of Econometrics, 112(2): 359-379. https://doi.org/10.1016/S0304-4076(02)00202-6 
  10. Khim V and Liew S (2004). Nonlinear adjustment of asean − 5 real exchange rates: symmetrical or asymmetrical?. Economics Letters, 6(8): 1-19.     
  11. Liew VKS, Baharumshah AZ, and Chong TTL (2004). Are Asian real exchange rates stationary?. Economics Letters, 83(3): 313-316. https://doi.org/10.1016/j.econlet.2003.10.021 
  12. Lu YC, Chang T, and Yu CP (2011). Long run purchasing power parity with asymmetric adjustment: Evidence from mainland China and Taiwan. Romanian Journal of Economic Forecasting, 4(1): 59–70.     
  13. Phillips PC and Perron P (1988). Testing for unit root in time series regression. Journal Article, 75(2): 335-346. https://doi.org/10.1093/biomet/75.2.335 
  14. Said SE and Dickey DA (1984). Testing for unit roots in autoregressive-moving average models of unknown order. Biometrika, 71(3): 599-607. https://doi.org/10.1093/biomet/71.3.599 
  15. Su CW, Horng YS, and Wu YL (2010). Asymmetric Adjustment and Long-run purchasing power parity in BRICs. Applied Economics Letters, 17(11): 1083-1087. https://doi.org/10.1080/00036840902817458 
  16. Tiwari AK and Shahbaz M (2014). Revisiting purchasing power parity for India using threshold cointegration and nonlinear unit root test. Economic Change and Restructuring, 47(2): 117-133. https://doi.org/10.1007/s10644-013-9144-9