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Real exchange rates persistence in the West African monetary zone: a revisit of the PPP puzzle

Real exchange rates persistence in the West African monetary zone: a revisit of the PPP puzzle PurposeThe purpose of this paper is to examine whether the purchasing power parity (PPP) holds for countries in the West African Monetary Zone (WAMZ).Design/methodology/approachThe author uses time series and panel data techniques.FindingsOverall, the evidence is inconclusive. The time series and panel unit root tests rejected the PPP. The time series cointegration test supported it. The panel cointegration tests are, however, inconclusive.Research limitations/implicationsThe inconclusive evidence implies that the appropriateness of the PPP-based policies which have been implemented in the WAMZ may be difficult to assess. Moreover, the question of whether the WAMZ agenda may face trade obstacles is still widely open. Perhaps fractional unit root and cointegration techniques may help pin down conclusive evidence. Future studies may consider this direction.Originality/valueThe paper is original in the sense that it is the first to utilize a mixture of time series and panel data techniques to examine the PPP hypothesis for these countries. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Emerging Markets Emerald Publishing

Real exchange rates persistence in the West African monetary zone: a revisit of the PPP puzzle

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References (101)

Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
1746-8809
DOI
10.1108/IJoEM-08-2015-0155
Publisher site
See Article on Publisher Site

Abstract

PurposeThe purpose of this paper is to examine whether the purchasing power parity (PPP) holds for countries in the West African Monetary Zone (WAMZ).Design/methodology/approachThe author uses time series and panel data techniques.FindingsOverall, the evidence is inconclusive. The time series and panel unit root tests rejected the PPP. The time series cointegration test supported it. The panel cointegration tests are, however, inconclusive.Research limitations/implicationsThe inconclusive evidence implies that the appropriateness of the PPP-based policies which have been implemented in the WAMZ may be difficult to assess. Moreover, the question of whether the WAMZ agenda may face trade obstacles is still widely open. Perhaps fractional unit root and cointegration techniques may help pin down conclusive evidence. Future studies may consider this direction.Originality/valueThe paper is original in the sense that it is the first to utilize a mixture of time series and panel data techniques to examine the PPP hypothesis for these countries.

Journal

International Journal of Emerging MarketsEmerald Publishing

Published: Apr 18, 2017

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