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The Fourier Quantile Unit Root Test with an Application to the PPP Hypothesis in the OECD

Author

Listed:
  • Mohsen Bahmani-Oskooee
  • Tsangyao Chang
  • Omid Ranjbar

Abstract

With the introduction of new unit root tests, old theories receive a renewed attention. Quantile unit root test and Purchasing Power Parity (PPP) is no exception. However, we take an additional step and combine the quantile unit root test with smooth unknown multiple breaks through a Fourier expansion and test the PPP hypothesis in each of the 23 OECD countries. The new test yields support for the PPP in most countries in the sample, bringing us closer to solving the PPP puzzle.

Suggested Citation

  • Mohsen Bahmani-Oskooee & Tsangyao Chang & Omid Ranjbar, 2017. "The Fourier Quantile Unit Root Test with an Application to the PPP Hypothesis in the OECD," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot GmbH, Berlin, vol. 63(3), pages 295-317.
    • Handle: RePEc:dah:aeqaeq:v63_y2017_i3_q3_p295-317
    DOI: 10.3790/aeq.63.3.295
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    Citations

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    Cited by:

    1. Desli, Evangelia & Gkoulgkoutsika, Alexandra, 2021. "Economic convergence among the world’s top-income economies," The Quarterly Review of Economics and Finance, Elsevier, vol. 80(C), pages 841-853.
    2. Badri Narayan Rath & Vaseem Akram, 2021. "Popularity of Unit Root Tests - A Review," Asian Economics Letters, Asia-Pacific Applied Economics Association, vol. 2(4), pages 1-5.
    3. Kenneth S. Chan & Jennifer T. Lai & Xiaoyi Liang, 2023. "Testing the validity of purchasing power parity for China: Evidence from the Fourier quantile unit root test," Review of International Economics, Wiley Blackwell, vol. 31(2), pages 464-492, May.
    4. David De Villiers & Andrew Phiri, 2022. "Towards resolving the purchasing power parity (PPP) ‘Puzzle’ in newly industrialized countries (NIC’s)," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 31(2), pages 161-180, February.
    5. Lee, Yi-Lung & Ranjbar, Omid & Jahangard, Fateme & Chang, Tsangyao, 2020. "Analyzing slowdown and meltdowns in the African countries: New evidence using Fourier quantile unit root test," International Review of Economics & Finance, Elsevier, vol. 65(C), pages 187-198.
    6. Lee, Chien-Chiang & Ranjbar, Omid & Lee, Chi-Chuan, 2021. "Testing the persistence of shocks on renewable energy consumption: Evidence from a quantile unit-root test with smooth breaks," Energy, Elsevier, vol. 215(PB).

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