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Additional evidence of long-run purchasing power parity with black and official exchange rates

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  • Alper Aslan
  • Ferit Kula
  • Huseyin Kalyoncu

Abstract

In this study, the validity of Purchasing Power Parity (PPP) hypothesis is investigated by using unit root test on official and black market exchange rates for Turkey. When we used the classical unit root test, we found poor evidence for the validity of PPP in classical PP test but no evidence for PPP in the augmented Dickey-Fuller test. However, by using Zivot-Andrews test allowing for one structural break in the series of PPP, we find stronger evidence for both official and black market exchange rates. Our findings illustrate that the unit root test with structural break is powerful than classical ones for long-run PPP.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics Letters.

Volume (Year): 17 (2010)
Issue (Month): 14 ()
Pages: 1379-1382

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Handle: RePEc:taf:apeclt:v:17:y:2010:i:14:p:1379-1382

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Cited by:
  1. Alper ASLAN, 2010. "The validity of PPP: evidence from Lagrange multiplier unit root tests for ASEAN countries," Economics Bulletin, AccessEcon, vol. 30(2), pages 1433-1443.

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