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Absolute Purchasing Power Parity Hypothesis: The Case of Fragile Five

Author

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  • ÇOŞKUN, Nuran

    (Mersin University)

Abstract

This study, investigates the validity of Purchasing Power Parity hypothesis for Turkey, Brazil, India, Indonesia and South Africa between the period 1994:01-2018:11. According to the nonlinearity results, real exchange rate series has non-linear form. Furthermore, since the real exchange rate series has smooth and/or sharp breaks (shifts) with nonlinear forms, the stationary of the series were investigated by using nonlinear unit root test which is suggested by Ranjbar, Chang, Elmi & Lee (2018). Ranjbar et al. (2018) revealed that the real exchange rate of South Africa is stationary under symmetric form and the real exchange rate of India is stationary under asymmetric form. Therefore, the results indicate that PPP does not hold for Turkey, Brazil and Indonesia while it holds for South Africa and India.

Suggested Citation

  • ÇOŞKUN, Nuran, 2020. "Absolute Purchasing Power Parity Hypothesis: The Case of Fragile Five," Bulletin of Economic Theory and Analysis, BETA Journals, vol. 5(1), pages 41-55, June.
    • Handle: RePEc:ris:betajl:0044
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    More about this item

    Keywords

    Purchasing Power Parity; Real Exchange Rate; Monetary Policy; Fragile Five Countries; Nonlinear Time Series; Nonlinear Unit Root;
    All these keywords.

    JEL classification:

    • F00 - International Economics - - General - - - General
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General

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