Purchasing Power Parity Theory Revisited: Recent Evidence from US Dollar and Japanese Yen

2002 ◽  
Vol 3 (1) ◽  
pp. 53-61 ◽  
Author(s):  
Kishore G. Kulkarni ◽  
Maiko Ishizaki
Keyword(s):  
Purchasing Power Parity ◽  
Purchasing Power ◽  
Power Parity ◽  
Us Dollar ◽  
Japanese Yen

scholarly journals Testing the Purchasing Power Parity Hypothesis: Case of ASEAN Economies

2018 ◽  
Vol 64 (4) ◽  
pp. 74-85
Author(s):  
Jani Bekő ◽  
Darja Boršič
Keyword(s):  
Purchasing Power Parity ◽  
Data Series ◽  
Purchasing Power ◽  
Power Parity ◽  
Crisis Period ◽  
The Great Recession ◽  
Us Dollar ◽  
Asean Countries ◽  
Japanese Yen ◽  
Chinese Yuan

Abstract We examine the purchasing power parity (PPP) hypothesis of 10 members of ASEAN. A battery of panel unit root tests is employed on data series from January 1995 to January 2018 in order to search for validity of PPP in the period before the Great Recession and in the post-crisis period. All the calculations are based on four numeraire currencies: Chinese yuan (CNY), Japanese yen (JPY), US dollar (USD), and the euro (EUR). First, following the outcome of the present study for ASEAN countries, the PPP holds mostly with respect to CNY rates. Second, for the post-financial crisis period, our research proves conclusively that the PPP supposition is predominantly valid between the currencies of ASEAN countries and EUR rates. The sample of countries in the study is limited to the ASEAN group of economies. Based on the evaluated parity conditions, the emergence of global economic crisis brought about significant currency shifts in the ASEAN. The selection and testing of a broader range of numeraire currencies is vital to provide empirical underpinning for PPP notion.

scholarly journals Pembuktian Konsep Law Of One Price (LOOP) Dalam Absolute Purchasing Power Parity Menggunakan The Big Mac Index Antar Negara The Six Cheapest (Indonesia – Malaysia) Per Juli 2021

2021 ◽  
Vol 6 (2) ◽  
pp. 184-198
Author(s):  
Dewi Cahyani Pangestuti ◽  
R. Ferry Riantiarno
Keyword(s):  
Purchasing Power Parity ◽  
Free Market ◽  
Secondary Data ◽  
Law Of One Price ◽  
Purchasing Power ◽  
Power Parity ◽  
The Us ◽  
Us Dollar ◽  
The Absolute ◽  
Descriptive Method

This study aims to prove the existence of the absolute purchasing power parity theory using The Big Mac Index and take the example of The Six Cheapest countries, two of which are Indonesia and Malaysia. The data taken is secondary data that has been measured and processed by The Economist which contains the prices of the Big Mac units sold by each country, in The Big Mac Index is 56 countries with different incomes. The method used is a descriptive method, with the literature method technique. The results show that in the end absolute purchasing power parity will not be formed in the free market. This is stated by the non-meeting points of purchasing power parity under conditions of real consumption. Also, it is proven by the undervalued value of the rupiah and ringgit in Indonesia and Malaysia against the US dollar, as well as the level of consumption of each country that must be adjusted.

scholarly journals International Evidence On Purchasing Power Parity Theory: A Partial Equilibrium Empirical Investigation

2011 ◽  
Vol 7 (5) ◽  
Author(s):  
Bahram Adrangi ◽  
Mary Allender ◽  
Kambiz Raffiee
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Purchasing Power Parity ◽  
Fourth Quarter ◽  
Partial Equilibrium ◽  
Purchasing Power ◽  
Power Parity ◽  
Australian Dollar ◽  
Bilateral Exchange ◽  
Us Dollar

This paper tests the Purchasing Power Parity (PPP) theory in a partial equilibrium framework. Statistical tests are employed to test the PPP theory for floating exchange rates of the Australian and Canadian dollars, Swiss frank and the British pound. The study period spans the fourth quarter of 1974 through the fourth quarter of 2006. The Johansen and Juselieus test of cointegration supports a long-run relationship between inflation and exchange rate predicted by the PPP theory only for the bilateral exchange rates of the pound and the Australian dollar. This evidence suggests that the PPP in its strict theoretical sense in the case of the bilateral exchange rate of the US dollar and Australian dollar is rejected but not for the case of the exchange rate of the pound and US dollar. However, the Granger causality test further supports the findings of the cointegration test. It shows that in the short-run, the money supply and GDP ratios Granger cause the movements of this exchange rate.

scholarly journals PENGARUH PARITAS DAYA BELI DAN PARITAS SUKU BUNGA, TERHADAP NILAI TUKAR RUPIAH TERHADAP DOLLAR AMERIKA SERIKAT

IQTISHODUNA ◽  
2018 ◽  
pp. 55-70
Author(s):  
Robiatul Adhawiyah ◽  
Maretha Ika Prajawati ◽  
Rieza Firdian
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Purchasing Power Parity ◽  
Real Interest Rate ◽  
Purchasing Power ◽  
Fisher Effect ◽  
Power Parity ◽  
Interest Rate Parity ◽  
Us Dollar ◽  
Rate Parity

The exchange rate will react against change of inflation and interest rate, at least there are three theories that explain the relationship between inflation, interest rate, and exchange rate, namely purchasing power parity, interest rate parity, and international fisher effect. The purpose of this study was to determine the influence of purchasing power parity, interest rate parity, and international fisher effect on the Rupiah exchange rate against US Dollar. The populations in this research included inflation time series data, nominal interest rate, real interest rate, and Rupiah exchange rate. The data used in is secondary data form the inflation report, nominal interest rate, real interest rate, and Rupiah exchange rate quarterly. The independent variable used purchasing power parity, interest rate parity, and international fisher effect,the dependent variable used the Rupiah exchange rate against US Dollar. The result of this study indicated that the purchasing power parity, interest rate parity simultaneously had a significant influence on the exchange rate of Rupiah/US Dollar.

scholarly journals Purchasing power parity in the Colombian exchange rate

Ánfora ◽  
2018 ◽  
Vol 25 (45) ◽  
pp. 123-143
Author(s):  
Oscar Hernán Cerquera Losada ◽  
Camilo Fabiam Gómez Segura ◽  
Cristian José Arias Barrera
Keyword(s):  
Exchange Rate ◽  
Purchasing Power Parity ◽  
Imperfect Competition ◽  
Structural Changes ◽  
Social Economic ◽  
Unit Roots ◽  
Purchasing Power ◽  
Power Parity ◽  
The Us ◽  
Us Dollar

Objetive: to determine the fulfillment of the purchasing power parity (PPP) theory in Colombia, the exchange rate with the US dollar using as a standard. Methodology: to check if the PPP in Colombia is achieved, monthly and quarterly data was used, which ran from January 1959 to December 2015. To do this, the longterm behavior from the real exchange rate was modeled, contrasting the unit  roots presence and structural changes. In addition, a bivariate cointegration model  was used. Results: it was found that, in the case of Colombia, the PPP theory was not  fulfilled, since the peso and the dollar are not cointegrated. Therefore, according to the unitary root methodology, the PPP hypothesis in Colombia for the period 1959- 2015 is not validated. Everything seems to indicate that the Colombian peso has little relation with the US dollar. Conclusions: the use of general price indices, which include tradable goods between countries, multiple barriers to international trade, imperfect competition and social, economic, political and cultural differences between both countries are important aspects when explaining the unfulfillment of the PPP

scholarly journals A Test Of Purchasing Power Parity (PPP) Theory And The International Fisher Effect: A Case Of The U.S. Dollar And The Japanese Yen

2011 ◽  
Vol 7 (1) ◽  
pp. 82
Author(s):  
Kishore G. Kulkarni
Keyword(s):  
Exchange Rates ◽  
Purchasing Power Parity ◽  
Explanatory Power ◽  
Early Years ◽  
Purchasing Power ◽  
Fisher Effect ◽  
Power Parity ◽  
Time Period ◽  
Japanese Yen ◽  
The U.S

The present paper discusses the theories of Purchasing Power Parity (PPP) and the International Fisher Effect dating back to the early years of the twentieth century, and tests their evidence for the recent time period data for the U.S. dollar Yen exchange rate. The results show that both these theories provide a satisfactory explanation of the behavior of exchange rates. One of the main reasons why these theories lost their explanatory power in recent years was the inflexibility of exchange rates in the Bretton Woods System. However, as the exchange rates became flexible again in recent years, the theories have become more applicable. It is further observed that the quarterly data are more relevant for these theories than the monthly data.

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