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Does PPP hold in African countries? Further evidence based on a highly dynamic non-linear (logistic) unit root test

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With a view to investigating whether the purchasing power parity (PPP) theory holds true for selected African countries during the January 1980–December 2003 period, we employ a rigorous, highly dynamic non-linear (logistic) unit root test, as first advanced by Leybourne et al. (1998), which is considerably more powerful than those tests traditionally used. Compared with the rejection of the null of the unit root process for only one of the 22 countries under study when we use the traditional ADF, PP, KPSS, NP and the DF-GLS unit root tests, with the Leybourne et al. (1998) test, we strongly reject the null of the unit root process for a surprising six of the 22 countries. These empirical results clearly indicate that PPP holds true for these six countries, namely the Central African Republic, the Côte d’Ivoire, Kenya, Madagascar, Uganda and Lesotho.

Document Type: Research Article


Affiliations: 1: Department and Graduate Institute of Finance, Feng Chia University, Taichung, Taiwan 2: Department of Accounting, College of Management, Ling Tung University, Taiwan 3: Department of Business Administration, Ling Tung University, Taiwan 4: College of Business, Feng Chia University, Taichung, Taiwan

Publication date: 2006-11-10

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