Mokoena, Thabo Mishack2008-09-302008-09-302008-06Mokoena, T, Gupta, R & Van Eyden, R 2008, 'Testing for PPP using SADC real exchange rates', University of Pretoria, Department of Economics, Working paper series, no. 2008-22. [http://web.up.ac.za/default.asp?ipkCategoryID=736&sub=1&parentid=677&subid=729&ipklookid=3]http://hdl.handle.net/2263/7422This paper attempts to provide evidence indicating that the Purchasing Power Parity (PPP) puzzle is becoming less of a puzzle. It present the results of Augmented Dickey- Fuller (ADF) test, nonlinear tests of nonstationarity, and Bayesian unit root tests, applied to ten SADC countries. The Bayesian tests were found to be biased in favour of a trend stationary model in all cases. It is argued that nonlinear approaches to exchange rate adjustments are likely to provide a firmer basis for inference and stronger support for the PPP in the long-term. This is more so at 1 per cent and 5 per cent levels of significance.enUniversity of Pretoria, Department of EconomicsNonlinear nonstationarity testsBayesian unit root testAugmented Dickey-Fuller (ADF) testPurchasing power parityForeign exchange ratesWorking Paper