Caporale, Guglielmo Maria and Gil-Alana, Luis A. (2011) Testing PPP for the South African Rand/US Dollar Real Exchange Rate at Different Data Frequencies. Centre for EMEA Banking, Finance and Economics Working Paper Series, 2011 (18). pp. 1-18.
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This paper tests the PPP hypothesis for the South African rand/ US dollar real exchange rate using a fractional integration framework. The results suggest that the real exchange rate of the South African rand with respect to the US dollar is a highly dependent variable with an order of integration very close to 1. This finding is not affected by the data frequency considered (daily, weekly or monthly). Also, there appears to be a single break in December 2001 (possibly corresponding to a change in the monetary policy framework), with the unit root null being rejected in favour of d > 1 for the periods before the break, but not afterwards. Thus, our results strongly reject the PPP hypothesis for the South African rand / US dollar rate across data frequencies.
|Uncontrolled Keywords:||Centre for EMEA Banking, Finance and Economics Working Paper Series; PPP; real exchange rate; mean reversion, United States, Purchasing Power Parity|
|Subjects:||300 Social sciences > 330 Economics|
|Department:||Guildhall School of Business and Law|
|Depositing User:||David Pester|
|Date Deposited:||20 Apr 2015 13:38|
|Last Modified:||20 Apr 2015 13:38|
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