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Title: The role of structural breaks, nonlinearity and asymmetric adjustments in African bilateral real exchange rates
Authors: Ahmad, A.H.
Aworinde, Olalekan B.
Keywords: PPP
Bilateral exchange rates
LM test
Structural breaks
Asymmetric cointegration
Africa
Issue Date: 2017
Publisher: © Elsevier
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, DOI: 10.1016/j.iref.2016.05.004.
Abstract: 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.
Description: This item will remain closed access until 18/05/2017.
Version: Accepted for publication
DOI: 10.1016/j.iref.2016.05.004
URI: https://dspace.lboro.ac.uk/2134/21426
Publisher Link: http://dx.doi.org/10.1016/j.iref.2016.05.004
ISSN: 1873-8036
Appears in Collections:Closed Access (Economics)

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