Testing international parity hypothesis in a multivariate identified co-integrating system: the Turkish evidence
AbstractIn this paper, a multivariate co-integrating model is constructed upon the Turkish economy to examine the validity of the purchasing power parity and the uncovered interest parity theories simultaneously. Estimation results obtained from the identified co-integrating vectors support a priori modelling expectations and yield evidence to the existence of both parities when integrated within each other. However, no evidence is obtained in favor of the two international exchange rate determination parity hypotheses when formulated in isolation. A policy inference derived from the paper can be summarized such that, since the market mechanisms seem to closely affect the long-run course of the nominal exchange rate, exchange rate based stabilization programs should be appreciated by economic agents in a cautious way.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 20020.
Date of creation: 2008
Date of revision:
Publication status: Published in İstanbul Üniversitesi Sosyal Bilimler Meslek Yüksek Okulu Sosyal Bilimler Dergisi 1.2008(2008): pp. 129-137
Purchasing Power Parity ; Uncovered Interest Parity ; Turkish Economy ;
Find related papers by JEL classification:
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
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