Purchasing power parity for East-Asia countries: further evidence based on panel stationary test with multiple structural breaks

Abstract

In this article, we re-investigate the validity of Purchasing Power Parity (PPP) for a sample of 10 East-Asia countries over the period of January 1987 to June 2005, using a recently developed econometric technique of the panel stationary test with multiple structural breaks, proposed by Carrion-i-Silvestre et al. (2005). This test considers multiple structural breaks positioned at different unknown dates and a different number of breaks for each individual. Empirical evidence shows that the PPP holds true for half of 10 East-Asia countries during the research period. Our results have important policy implications for these 10 East-Asia countries under study.

Acknowledgements

The authors are grateful to Dr Carrion-i-Silvestre who kindly provided the GAUSS program codes. Without his contribution, this article could not have been written in the first place. The authors also thank the editor, Prof Mark Taylor, for his suggestions and the time spent in reading this article. All these make this article more valuable and readable. Any errors that remain are our own.

Notes

¹ Asian-10 is becoming a key player in the global market. All 10 countries are members of the Asia-Pacific Economic Corporation (APEC).