Mean reversion in real exchange rate: empirical evidence from turkey, 1980-1999

Özet

\r\n Purchasing Power Parity (PPP) is one of the most important theoretical relations in international economics. Its empirical measurement, nevertheless, is under discussion. This paper investigates the mean-reversion in bilateral real exchange rate series for lira-dollar (TL/USD), lira-mark (TL/DM), lira-sterling (TL/BP) and lira-franc (TL/FF). The results of the semiparametric estimates show that biletarel real exchange rates have a long memory and are mean reverting processes. On the other hand, the results of the parametric estimates suggest that real TL/USD rate, real TL/DM rate, real TL/BP rate and the real TL/FF rate series are mean reverting processes. Empirical results of both the semiparametric and parametric estimates indicate that the PPP for Turkey can be viewed as a long-run proposition.\r\n