GDP Purchasing Power Parity per Capita and Its Determinants: A Panel Data Analysis for BRICS

Abstract

This study examines the Gross Domestic product purchasing power parity per capita (GDP PPP per capita) and its determinants using the panel data method to test for unit roots in Brazil, Russia, India, China, and South Africa (BRICS). The main dependent variable in our study is GDP PPP per capita while the independent variables are real exchange rate, real interest rate, consumer price index (CPI), and money supply. We find strong evidence of a long-run relationship among the chosen variables. The co-integration equation reveals positive relationship between GDP PPP per capita and the real exchange rate, real interest rate, and money supply and a negative relationship between GDP PPP and CPI. Based on the VEC Granger Causality/Block Erogeneity Wald Tests, the study finds that the GDP PPP per capita is influenced by the exchange rate and CPI. However, based on the overall Chi-square test, the study shows strong evidence of an influence of all variables on GDP PPP per capita. We hope this study would help the policy makers to come up with appropriate policies to bring about homogeneity among the BRICS nations.