ASYMMETRIC COINTEGRATION TESTS IN TESTING FOR PURCHASING POWER PARITY IN NIGERIA

Authors

  • NIRI MARTHA CHOJI Department of Mathematics, Plateau State University, Bokkos, Nigeria.
  • SAMUEL H. TSOK Department of Mathematics, Plateau State University, Bokkos, Nigeria.
  • NANLE T. DANAT Department of Mathematics, Plateau State University, Bokkos, Nigeria.
  • DOMINIC P. SHIE Department of Mathematics, Plateau State University, Bokkos, Nigeria.
  • MONICA JATAU Nasarawa State Ministry of Finance, Lafia.

Keywords:

Purchasing Power Parity; Threshold Autoregressive (TAR) model; Momentum Threshold Autoregressive (MTAR) model; Asymmetric adjustment.

Abstract

This paper examined if the purchasing power parity (PPP) theory exists with asymmetric
adjustment in Nigeria by using asymmetric cointegration approach of Enders and Siklos (TAR
and MTAR). Results of the threshold cointegration tests revealed evidence of long run PPP with
asymmetric adjustment in Nigeria. The asymmetric error correction model reveals that negative
deviations from PPP are eliminated more quickly than positive deviations. Based on the results
of that TAR model, breakdate threshold regression, DOLS and FMOLS, this study concludes
that, PPP theory may not hold at all time, exchange rate may adjust asymmetrically, where
negative deviations from PPP are eliminated more quickly than positive deviations and foreign
prices affect the exchange rate more in Nigeria. It is evident that the foreign price causes
appreciation of exchange rate while domestic price leads to depreciation of exchange rate.

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Published

2022-01-21

How to Cite

CHOJI, N. M. ., TSOK, S. H. ., DANAT, N. T. ., SHIE, D. P. ., & JATAU, M. (2022). ASYMMETRIC COINTEGRATION TESTS IN TESTING FOR PURCHASING POWER PARITY IN NIGERIA. BIMA JOURNAL OF SCIENCE AND TECHNOLOGY (2536-6041), 5(03), 66-77. Retrieved from https://journals.gjbeacademia.com/index.php/bimajst/article/view/331

Issue

Vol. 5 No. 03 (2022): Vol. 5 No. 3 January 2022

Section

Articles