The purpose of this paper is to test the validity of the purchasing power parity (PPP) in Africa in the context of a multivariate error-correction model. This approach allows for the consideration of long-run elasticities as well as the dynamics of the short-run adjustment of exchange rates to...

We suggest that an unexpected volatility shock is an important risk factor to induce the intertemporal relation, and the conflicting findings on the relation could be attributable to an omitting variable bias resulting from ignoring the effect of an unexpected volatility shock on the relation....