Hendriks, Johannes Jurgens and BongaBonga, Lumengo (2022): Testing for the purchasing power parity (PPP) hypothesis between South Africa and its main trading partners: application of the quantile approach.

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Abstract
This paper tests whether the PPP theory holds between trading partners, depending on the volume of trade and trade friction, such as exchange control. The test is applied between South Africa, a country that applies an exchange control policy, and its trading partners. The paper uses the quantile unit root test and quantile cointegration regression approach to test for the strong and weakform PPP hypothesis. Strong evidence of the weakform PPP hypothesis is found for high export countries over all quantiles. Specifically, weakform PPP is found in China, the United States, Japan and the United Kingdom, whereas evidence of PPP, in general, was found to be lacking. The paper finds evidence that PPP is more likely to exist between countries with more significant trade volumes.
Item Type:  MPRA Paper 

Original Title:  Testing for the purchasing power parity (PPP) hypothesis between South Africa and its main trading partners: application of the quantile approach 
English Title:  Testing for the purchasing power parity (PPP) hypothesis between South Africa and its main trading partners: application of the quantile approach 
Language:  English 
Keywords:  purchasing power parity, quantile, exchange rates 
Subjects:  C  Mathematical and Quantitative Methods > C2  Single Equation Models ; Single Variables > C22  TimeSeries Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes F  International Economics > F3  International Finance > F31  Foreign Exchange 
Item ID:  112915 
Depositing User:  Prof Lumengo BongaBonga 
Date Deposited:  02 May 2022 10:19 
Last Modified:  02 May 2022 10:19 
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URI:  https://mpra.ub.unimuenchen.de/id/eprint/112915 