DOES PURCHASING POWER PARITY SURVIVE POLITICAL SHOCKS IN SOUTH-AFRICA

The objectives of the paper are to examine the Purchasing Power Parity (PPP) hypothesis for the South African economy during the period 1975 -1994 using high-frequency data. The analysis is conducted both for th e entire period and also for different subperiods in order to take int o account possible structural changes. For the rand/dollar exchange ra te, the authors find on the basis of a unique long-run cointegrating r elationship that there is significant evidence supporting the PPP hypo thesis for the entire period. The use of nonlinear least squares and J ohansen-Juselius procedures is made to reach the above conclusion.