Does the Long–run PPP Hypothesis Hold for Africa? Evidence from a Panel Cointegration Study

Abstract

The long–run purchasing power parity (PPP) concept is empirically studied using the parallel market exchange rates of 17 African countries and employing the panel cointegration method. This approach is particularly useful when analysing African countries, which do not have long time–series. This paper presents results that support the weak–form of the long–run PPP hypothesis in Africa, which does not require a homogeneity restriction on prices.