Half-life deviations from PPP in the South African Development Community (SADC)
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Date
Authors
Mokoena, Thabo Mishack
Gupta, Rangan
Van Eyden, Renee
Journal Title
Journal ISSN
Volume Title
Publisher
Euro-American Association of Economic Development
Abstract
This paper utilises various recently developed econometric methods to obtain better approximations to the half-life for real exchange rates of ten South African Development Community (SADC) countries and to generate confidence intervals for half-life deviations from the purchasing power parity (PPP). The robust methods of Stock (1991), Elliott and Stock (2001), and Hansen (1999) imply that point estimates of less than 36 months exist, making them compatible with PPP. However, the results of ADF and ADF-GLS tests render the SADC real exchange rates as nonstationary processes, a result that is patently at odds with mean-reversion, implying at the same time the possibility of infinite half-lives. Therefore the empirical results appearing in this paper do not convincingly resolve the half-life version of the PPP puzzle and leaves room for future research in the directions of non-parametric methods and median unbiased confidence intervals.
Description
Keywords
Half-life, Real exchange rates
Sustainable Development Goals
Citation
Mokoena, TM, Gupta, R & Van Eyden, R 2009, 'Half-life deviations from PPP in the South African Development Community (SADC)', Applied Econometrics and International Development, vol. 9, no.1. [http://www.usc.es/economet/eaa.htm]