Acta Universitatis Danubius. Œconomica, Vol 13, No 1 (2017)

Validity of purchasing power parity in BRICS under a DFA Approach

Emmanuel Numapau Gyamfi, Anokye Mohammed Adam

Abstract


Objectives

This study tests the validity of the purchasing power parity (PPP) theory in Brazil, Russia, India, Macao-China and South Africa. We examine real exchange rates of these countries for mean reversion.

Approach

The Hurst exponent is our mean reversion measure which is evaluated by the Detrended Fluctuation Analysis (DFA) in a rolling window to determine the validity of the PPP theory amongst these countries through time.

Results

Our results show persistence in real exchange rates; an indication not supporting the PPP theory in the five countries.

Value

The study contributes to the extant literature of the PPP theory in BRICS using the DFA approach in a rolling window through 

References



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