Half-life deviations from ppp in the South African development community

Thabo M. Mokoena ^[2] ; Rangan Gupta ^[1] ; Reneé Van Eyden ^[1]
1. [1] University of Pretoria
  
  University of Pretoria
  
  City of Tshwane, Sudáfrica
2. [2] South African Reserve Bank
Localización: Applied econometrics and international development, ISSN 1578-4487, Vol. 9, Nº. 1, 2009, págs. 141-148
Idioma: inglés
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Resumen
- This paper utilises various recently developed econometric methods to obtain better approximations to the half-life for real exchange rates of ten South African Development Community (SADC) countries and to generate confidence intervals for half-life deviations from the purchasing power parity (PPP). The robust methods of Stock (1991), Elliott and Stock (2001), and Hansen (1999) imply that point estimates of less than 36 months exist, making them compatible with PPP. However, the results of ADF and ADFGLS tests render the SADC real exchange rates as no stationary processes, a result that ispatently at odds with mean-reversion, implying at the same time the possibility of infinite half-lives. Therefore the empirical results appearing in this paper do not convincingly resolve the half-life version of the PPP puzzle and leaves room for future research in the directions of non-parametric methods and median unbiased confidence intervals.