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 Purchasing Power Parity Approach to Exchange Rate Misalignment in Nigeria

2021 ◽  
Vol 12 (No. 1) ◽  
pp. 45-75
Author(s):  
Musa Nakorji ◽  
Ngozi T. I. Agboegbulem ◽  
Blessing A. Gaiya ◽  
Ngozi V. Atoi
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Purchasing Power Parity ◽  
Structural Breaks ◽  
Empirical Support ◽  
Purchasing Power ◽  
Power Parity ◽  
Exchange Rate Misalignment ◽  
Us Dollar ◽  
Chinese Yuan

This study examines the purchasing power parity (PPP) approach to the determination of exchange rate misalignment in Nigeria by using two variants of the PPP: the absolute PPP (aPPP) and the relative PPP (rPPP). Data on the Nigerian Naira to US Dollar ( N/$), British Pound ( N/£) and Chinese Yuan (N /¥) interbank exchange rates, Nigeria consumer price index and Inflation as well as the US, UK and China consumer price indices and inflation rates spanning 2008:M1 to 2018:M12 were utilized. A recently modified fractional cointegration framework was employed, taking care of smooth structural breaks and nonlinearity, while the unit root tests employed the fractional alternatives. The results confirmed that the aPPP approach to exchange rate determination is unrealistic but revealed empirical support for the rPPP approach. Furthermore, the exchange rates computed with the rPPP approach show that the interbank Naira to US Dollar, UK Pounds and Chinese Yuan exchange rates were overvalued in most of the period of this study. The period of undervaluation observed in June 2016 and April 2017 coincided with the periods when CBN introduced the investors and exporters window. The study recommends the use of rPPP for gauging the level of exchange rate misalignment in Nigeria and suggests the need to diversify the export base to appreciate the exchange rate.

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 Identifying The Purchasing Power Parity of Indonesia Rupiah (IDR) based on BIG MAC Index

2016 ◽  
Vol 17 (2) ◽  
pp. 210
Author(s):  
Tongam Sihol Nababan
Keyword(s):  
Exchange Rate ◽  
Purchasing Power Parity ◽  
Real Income ◽  
Purchasing Power ◽  
Power Parity ◽  
The Real ◽  
The People ◽  
The Usa ◽  
The Exchange Rate ◽  
Asean Countries

The aim of this study is to identify : (1) profile of exchange rate and purchasing power parity of IDR against US $ based on Big Mac Index compared to the exchange rate of other countries, and (2) the position of the Big Mac Affordability of  Indonesia compared to other ASEAN countries. The results showed that based on Big Mac index during the period April 1998 up to January 2015, IDR exchange rate tends to be undervalued against the USA dollar. The cause of the currency tends to be in a position of undervalued due to the components of non-tradable have not been included in Big Mac index. The index of Big Mac Affordability indicates that there is a great disparity of income between Singapore and five other ASEAN countries. The purchasing power of the real income of the people in Singapore is nearly five times the real income of the people in Indonesia.

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.

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