The Validity of Purchasing Power Parity Hypothesis for Eleven Middle Eastern Countries
-
There is a large literature that examines purchasing power parity (PPP). The growth in this literature is mainly due to the absence of a consensus view on whether or not PPP holds. This paper considers PPP for 11 Middle Eastern countries using a number of tests: the one-break test unit root, the two-breaks unit root test, and the panel Lagrange multiplier (LM) unit root test with structural breaks. The main finding from univariate tests is that there is evidence for PPP in only seven countries (Lebanon, Saudi Arabia, Egypt, Iran, Syria, Tunisia and Sudan). However, when the panel LM test is applied with two structural breaks, strong evidence is found in favor of PPP for the Middle Eastern countries.
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
Articles in the same Issue
- Article
- Economic Trilemma and Exchange Rate Management in Egypt
- International Diversification Benefits between US, Turkish and Egyptian Stock Markets
- The Validity of Purchasing Power Parity Hypothesis for Eleven Middle Eastern Countries
- Imperfect Information and Credit Rationing Equilibrium: Evidence from Egypt
- Book Review
Articles in the same Issue
- Article
- Economic Trilemma and Exchange Rate Management in Egypt
- International Diversification Benefits between US, Turkish and Egyptian Stock Markets
- The Validity of Purchasing Power Parity Hypothesis for Eleven Middle Eastern Countries
- Imperfect Information and Credit Rationing Equilibrium: Evidence from Egypt
- Book Review
