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Purchasing power parity in GIIPS countries: evidence from unit root tests with breaks and non-linearity

Author

Listed:
  • Saban Nazlioglu
  • Mehmet Altuntas
  • Emre Kilic
  • Ilhan Kucukkkaplan

Abstract

Purpose - This paper aims to test purchasing power parity (PPP) hypothesis for Greece, Italy, Ireland, Portugal and Spain, which are known as the GIIPS countries. Design/methodology/approach - The authors conduct a comprehensive analysis by using unit root approaches without and with structural breaks and non-linearity. Findings - The PPP is valid for the GIIPS countries. Considering structural breaks in non-linear framework plays a crucial role. Originality/value - There is no empirical study testing PPP hypothesis by focusing on the GIIPS countries. This study further takes into account for structural breaks and non-linearity in the real exchange rates of these countries.

Suggested Citation

  • Saban Nazlioglu & Mehmet Altuntas & Emre Kilic & Ilhan Kucukkkaplan, 2021. "Purchasing power parity in GIIPS countries: evidence from unit root tests with breaks and non-linearity," Applied Economic Analysis, Emerald Group Publishing Limited, vol. 30(90), pages 176-195, October.
    • Handle: RePEc:eme:aeapps:aea-10-2020-0146
    DOI: 10.1108/AEA-10-2020-0146
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    More about this item

    Keywords

    PPP; Unit root tests; Real exchange rate; GIIPS; C22; F31;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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