Does the Long-Run Ppp Hypothesis Hold for Africa? Evidence From Panel Co-Integration Study

August 1, 1998

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper addresses whether parallel market exchange rates in Africa behave in the long run in a manner consistent with the purchasing power parity (PPP) hypothesis. A recent econometric method, the panel co-integration test, enables us to examine the long-run PPP hypothesis by pooling the time-series data of several countries. This approach is particularly useful when analyzing African countries, which often do not have long time series. Using pooled data for 16 African countries, the study concludes that the behavior of parallel market exchange rates in Africa is consistent with the long-run PPP hypothesis.

Subject: Exchange rate arrangements, Exchange rate flexibility, Exchange rates, Expenditure, Foreign exchange, Public investment and public-private partnerships (PPP), Purchasing power parity

Keywords: Africa, co-integration, Exchange rate arrangements, Exchange rate flexibility, exchange rate regime, exchange rate trend, exchange rate-price relationship, Exchange rates, PPP hypothesis, Public investment and public-private partnerships (PPP), Purchasing Power Parity, regimes in Africa, time series, WP

Pages:
22
Volume:
1998
DOI:
https://doi.org/10.5089/9781451854589.001
Issue:
123
Series:
Working Paper No. 1998/123
Stock No:
WPIEA1231998
ISBN:
9781451854589
ISSN:
1018-5941

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