Abstract
Is the real price of commodities among the Central Asian countries similar? Prior research suggests that for Central Asian countries the Purchasing Power Parity (PPP) doctrine does not hold. This article employs alternative cross-section correlations of panel unit root tests to examine the validity of the PPP hypothesis for three Central Asian countries vis-à-vis the Russian Federation. The empirical results show significant support for the PPP doctrine in these Central Asian countries when the testing takes into account the cross-sectional dependence on panel unit root tests.
Notes
1The tp
statistics is adjusted to an asymptotical standard normal distribution of statistics, and for the adjusted details please see Levin et al. (Citation2002). N and
are the sum of N and T, respectively.
2The Fisher test is based on a combination of p-values of the test statistic for an ADF or PP unit root tests in each cross-section unit. This article also uses the PP unit root test to examine the PPP; the testing result shows the same support for the PPP doctrine.