Purchasing power parity for 10 Latin American integration association countries: panel SURKSS tests

Abstract

This empirical study applies panel SURKSS tests, proposed by Wu and Lee (2009), to investigate the properties of long-run Purchasing Power Parity (PPP) in a sample of 10 Latin American Integration Association (LAIA) countries over the period January 1980 to September 2008. The empirical results from several panel-based unit root tests indicate that PPP does not hold for the LAIA-10 countries under study; however, panel SURKSS tests indicate that PPP is valid for half of these LAIA-10 countries. These results have important policy implications for these LAIA-10 countries under study.