Empirical investigation of purchasing power parity for Turkey: Evidence from recent nonlinear unit root tests
Central Bank Review, cilt.17, ss.39-45, 2017 (Scopus, TRDizin)
- Yayın Türü: Makale / Tam Makale
- Cilt numarası: 17
- Basım Tarihi: 2017
- Doi Numarası: 10.1016/j.cbrev.2017.03.001
- Dergi Adı: Central Bank Review
- Derginin Tarandığı İndeksler: Scopus, TR DİZİN (ULAKBİM)
- Sayfa Sayıları: ss.39-45
- Anahtar Kelimeler: Purchasing power parity, Real exchange rate, Nonlinearity, Smooth transition, Turkey, REAL EXCHANGE-RATE, OIL-PRICE SHOCK, MEAN REVERSION, GREAT CRASH, HYPOTHESIS, BEHAVIOR, PPP, STATIONARITY, VALIDITY, BREAKS
- Açık Arşiv Koleksiyonu: AVESİS Açık Erişim Koleksiyonu
- Orta Doğu Teknik Üniversitesi Adresli: Evet
Özet
This study
explores the empirical validity of the purchasing power parity (PPP) hypothesis
between Turkey and its four major trading partners,
the European Union, Russia, China and the US. Accounting
for the nonlinear nature of real exchange rates, we employ a battery of
recently developed nonlinear unit root tests. Our empirical
results reveal that nonlinear unit root tests deliver stronger evidence in
favor of the PPP hypothesis when compared to the conventional unit root tests
only if nonlinearities in real exchange rates are correctly specified. Furthermore, it emerges from our
findings that the real exchange rates of the countries having a free trade agreement
are more likely to behave as linear stationary processes.