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Real exchange rate behaviour in high inflation countries: empirical evidence from Turkey, 1980-1997

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  • Lucio Sarno

Abstract

The long-run purchasing power parity (PPP) hypothesis is re-examined using data for Turkey and its major trading partners during the period 1980-97, extending recent work by Telatar and Kazdagli. The empirical analysis suggests that, while conventional unit root tests do not enable the detection of mean reversion in real exchange rates and hence imply rejection of long-run PPP over the sample, using recently developed nonlinear modelling techniques, strong support is provided for the validity of long-run PPP as well as for theoretical models which predict nonlinear adjustment in real exchange rates. Results are in accord with previous evidence that PPP holds more closely on data for countries which have experienced unusually high inflation.

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Bibliographic Info

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

Volume (Year): 7 (2000)
Issue (Month): 5 ()
Pages: 285-291

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Handle: RePEc:taf:apeclt:v:7:y:2000:i:5:p:285-291

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Cited by:
  1. Dağdeviren, Sengül & Ogus Binatli, Ayla & Sohrabji, Niloufer, 2011. "Misalignment under different exchange rate regimes: the case of Turkey," MPRA Paper 46774, University Library of Munich, Germany.
  2. Liew, Venus Khim-Sen & Lee, Hock-Ann & Lim, Kian-Ping & Lee, Huay-Huay, 2006. "Linearity and stationarity of South Asian real exchange rates," MPRA Paper 517, University Library of Munich, Germany.
  3. repec:ebl:ecbull:v:6:y:2005:i:11:p:1-16 is not listed on IDEAS
  4. Aykut Kibritcioglu & Bengi Kibritcioglu, 2004. "Real Exchange Rate Misalignment in Turkey, 1987-2003 (in Turkish)," Macroeconomics 0403006, EconWPA, revised 09 Mar 2004.
  5. Venus Khim-Sen Liew & Chee-Keong Choong & Evan Lau & Kian-Ping Lim, 2005. "Exchange Rate – Relative Price Nonlinear Cointegration Relationship in Malaysia," Economics Bulletin, AccessEcon, vol. 6(11), pages 1-16.

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