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Purchasing power parity (PPP) between Iran and ASEAN-5 member countries: An application of panel unit root tests

Abbas, Amini-fard and Seyed Komail, Tayebi (2007) Purchasing power parity (PPP) between Iran and ASEAN-5 member countries: An application of panel unit root tests. In: International Economic Conference on Trade and Industry (IECTI) 2007, 3 - 5 December 2007, Bayview Hotel Georgetown, Penang. (Unpublished)

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In this paper, we examined the long-run purchasing power parity (PPP) for the five major ASEAN countries, ASEAN-5 (Malaysia, Indonesia, the Philippines, Singapore and Thailand) and the currency relationship, based on the PPP theory, between ASEAN-5 (as the East Asian side) and Iran (as the West Asian side) by using panel data methods to test for unit roots for period 1975-2005. We thus used five panel unit roots tests: Levin, Lin and Chu (2002), Breitung (2000), IM, Pesaran and Shin (2003), Maddala and Wu (1999), Choi (2001) and Hadri (1999). Except for Breitung test, other tests relied on PPP valued by real exchange rates. By the use of real effective exchange rates, most tests did not reject PPP hypothesis among ASEAN-5 members and between ASEAN-5 and Iran. We also found that real exchange rates among ASEAN-5 countries and between ASEAN and Iran are stationary. Overall, the results obtained imply the existence of a long-run and stationary interaction between currencies of both sides in East and West Asia (ASEAN-5 and Iran), leading to the expansion of bilateral trade and economic integration.

Item Type: Conference or Workshop Item (Paper)
Additional Information: Organized by Faculty of Economics, Universiti Utara Malaysia
Uncontrolled Keywords: Purchasing Power Parity (PPP), Panel Unit-Root Tests, ASEAN-5 and Iran
Subjects: H Social Sciences > HF Commerce
Divisions: College of Arts and Sciences
Depositing User: Mrs. Juwita Johari
Date Deposited: 14 Feb 2011 09:23
Last Modified: 14 Feb 2011 09:23
URI: http://repo.uum.edu.my/id/eprint/2325

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