Purchasing Power Parity in a Transition Economy-Cambodia:Evidence from Bilateral Exchange Rates

摘要

This study examines the validity of the Purchasing Power Parity (PPP) hypothesis for Cambodia. The standard unit root tests (Augmented Dickey-Fuller and Phillips-Perron) and the panel unit root tests fail to support the PPP hypothesis for nine of Cambodia's trading partners. The unit root tests with structural break, however, support the PPP hypothesis for the bilateral real exchange rates of the euro, Indonesian rupiah, Malaysian ringgit and Singaporean dollar. This finding is found to be relevant for a 'de-dollarization' strategy in Cambodia, and in responding to the recent global financial crisis.