Does long run Purchasing Power Parity (PPP) hold within the Southern African Customs Union (SACU)?

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Periodical article

Title:	Does long run Purchasing Power Parity (PPP) hold within the Southern African Customs Union (SACU)?
Author:	Makhetha, Masilo Philemon
Year:	2008
Periodical:	Review of Southern African Studies (ISSN 1024-4190)
Volume:	12
Issue:	1-2
Period:	December
Pages:	216-241
Language:	English
Notes:	biblio. refs.
Geographic term:	Southern Africa
Subjects:	exchange rates SACU econometrics Economics, Commerce Purchasing power parity foreign exchange Southern African Customs Union
Abstract:	This paper employs panel data unit root and co-integration tests, in the spirit of P. Pedroni (1997, 1998) and R. Larsson et al. (1998, 2001), to investigate the validity or otherwise of the Purchasing Power Parity (PPP) hypothesis within the SACU area of southern Africa. The PPP hypothesis is the hypothesis that exchange rates between currencies are determined in the long run by the amount of goods and services that each can buy. The Larsson et al. procedure is an extension of S. Johansen's (1988, 1995) methodology that allows for estimation of the number of co-integrating relations. This offers an interesting alternative to the residual based co-integration tests. The study employs quarterly time series data from four SACU member countries, namely, Botswana, Lesotho, Swaziland and Namibia, covering the period 1981-2000. It finds evidence in support of the validity of the PPP hypothesis for the SACU area. Bibliogr., sum. [Journal abstract, edited]