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Journals / Central Bank Review / 2017 / Cilt: 17 - Sayı: 2

Empirical investigation of purchasing power parity for Turkey: Evidence from recent nonlinear unit root tests

DİLEM YILDIRIM KASAP
Pages
39–45
DOI
—
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This is an openaccess article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/)

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Objective & Hypothesis:This study explores the empirical validity of the purchasing power parity (PPP) hypothesis betweenTurkey and its four major trading partners, the European Union, Russia, China and the US.
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Key Findings & Data:Accounting forthe nonlinear nature of real exchange rates, we employ a battery of recently developed nonlinear unitroot tests.
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Conclusion & Impact:This is an openaccess article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/)
🔬Design:Research Article
📍Scope:2017 Verileri
⚙️Variables:Domain Parameters

Abstract

This study explores the empirical validity of the purchasing power parity (PPP) hypothesis betweenTurkey and its four major trading partners, the European Union, Russia, China and the US. Accounting forthe nonlinear nature of real exchange rates, we employ a battery of recently developed nonlinear unitroot tests. Our empirical results reveal that nonlinear unit root tests deliver stronger evidence in favour ofthe PPP hypothesis when compared to the conventional unit root tests only if nonlinearities in realexchange rates are correctly speciŞed. Furthermore, it emerges from our Şndings that the real exchangerates of the countries having a free trade agreement are more likely to behave as linear stationaryprocesses.© 2017 Central Bank of The Republic of Turkey. Production and hosting by Elsevier B.V. This is an openaccess article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/)

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Cite This Article

KASAP, D. Y. (2017). Empirical investigation of purchasing power parity for Turkey: Evidence from recent nonlinear unit root tests. Central Bank Review, Cilt: 17 - Sayı: 2, 39–45. https://ajindex.com/articles/143273

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References (1)

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