Revisiting purchasing power parity for 16 Latin American countries: panel SURADF tests

Abstract

In this study, we apply the panel Seemingly Unrelated Regressions Augmented Dickey–Fuller (SURADF) tests developed by Breuer et al. (2001) to revisit the validity of Purchasing Power Parity (PPP) for 16 Latin American countries. The empirical results from several panel-based unit root tests indicate that PPP does not hold for these 16 countries under study. However, panel SURADF tests indicate that PPP is valid for 3 of these 16 countries. These results have important policy implications for these 16 Latin American countries under study.