On the purchasing power parity for latin-american countries

Abstract

The purpose of this paper is to test the hypothesis of long-run purchasingpower parity (PPP) for all Latin American countries. These countries sharesimilar economic history and contagious effects from currency crises, whichmight lead to comovements in their real exchange rates. New time series unitroot tests found evidence of PPP for the vast majority of countries. In thepanel data framework, tests for the null of unit root, null of stationarity, andunit root under multiple structural breaks indicated stationary real exchangerates. Thus, there is convincing evidence that PPP holds for Latin-Americancountries in the post-1980 period.