Long-run validity of purchasing power parity and rank tests for cointegration for Central Asian countries

This study finds that Purchasing Power Parity (PPP) holds in the long-run for Azerbaijan, Kazakhstan and Kyrgyzstan, based on Breitung’s (2001) rank tests for cointegration. Results from further analysis indicates that nominal exchange rates and relative prices are nonlinearly interrelated. Trad...

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Main Authors: Liew, Venus Khim-Sen, Chia, Ricky Chee-Jiun, Ling, Tai-Hu
Format: E-Article
Language:English
Published: Routledge 2010
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Online Access:http://ir.unimas.my/id/eprint/17991/7/Long-run%20validity%20of%20purchasing%20power%20parity%20%28abstract%29.pdf
http://ir.unimas.my/id/eprint/17991/
http://www.tandfonline.com/doi/full/10.1080/00036840902762704
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Summary:This study finds that Purchasing Power Parity (PPP) holds in the long-run for Azerbaijan, Kazakhstan and Kyrgyzstan, based on Breitung’s (2001) rank tests for cointegration. Results from further analysis indicates that nominal exchange rates and relative prices are nonlinearly interrelated. Trade barriers, transportation costs and government intervention in the pricing system in these countries may have resulted in the establishment of the above-mentioned nonlinear relationship.