Loughborough University
Browse
Review PPP_Manuscript_Accepted Version.pdf (176.72 kB)

The role of structural breaks, nonlinearity and asymmetric adjustments in African bilateral real exchange rates

Download (176.72 kB)
journal contribution
posted on 2016-06-01, 09:15 authored by Ahmad Hassan AhmadAhmad Hassan Ahmad, Olalekan B. Aworinde
This paper examines the validity of the purchasing power parity, PPP for six African countries of Botswana, Ghana, Kenya, Nigeria, South Africa and Tanzania using the countries' bilateral real exchange rates with their fifteen major trading partners for the period 1960–2011. It uses the Lagrangian multiplier, LM, which accommodates up to two endogenous structural breaks in addition to conventional unit root tests. The paper also uses the threshold cointegration tests to explore nonlinearity and asymmetric adjustments of the series. Results from the LM unit root tests indicate that the exchange rates of Botswana, Ghana, Kenya and Nigeria relative to their major trading partners are stationary. The results from the threshold cointegration suggest that there is a long-run relationship between the series and that the adjustments are asymmetric. Appreciation is faster than depreciation in most of the countries. This is consistent with suggestions that countries are intolerant of depreciation.

History

School

  • Business and Economics

Department

  • Economics

Published in

International Review of Economics and Finance

Citation

AHMAD, A. and AWORINDE, O., 2017. The role of structural breaks, nonlinearity and asymmetric adjustments in African bilateral real exchange rates. International Review of Economics and Finance, 45, pp. 144–159.

Publisher

© Elsevier

Version

  • AM (Accepted Manuscript)

Publisher statement

This work is made available according to the conditions of the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International (CC BY-NC-ND 4.0) licence. Full details of this licence are available at: https://creativecommons.org/licenses/by-nc-nd/4.0/

Publication date

2017

Notes

This paper was accepted for publication in the journal International Review of Economics and Finance and the definitive published version is available at http://dx.doi.org/10.1016/j.iref.2016.05.004.

ISSN

1873-8036

eISSN

1059-0560

Language

  • en

Usage metrics

    Loughborough Publications

    Exports

    RefWorks
    BibTeX
    Ref. manager
    Endnote
    DataCite
    NLM
    DC