Nonlinear adjustment to purchasing power parity for ASEAN countries

This study applies a simple and powerful nonlinear unit root test, proposed by Sollis (2009), to test the validity of long-run purchasing power parity (PPP) in a sample of ASEAN countries. The empirical results indicate that PPP only holds for three of these ASEAN countries studied, and the adjustment toward PPP is found to be nonlinear and asymmetric.

► We examine the validity of long-run purchasing power parity for ASEAN countries. ► We apply a simple and powerful nonlinear unit root test. ► The results indicate that PPP only holds for three of these ASEAN countries. ► These results imply the adjustment toward PPP is nonlinear and asymmetric.