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Nonlinear adjustment to purchasing power parity in China

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  • Tsangyao Chang

Abstract

This study applies a simple and powerful nonlinear unit root test proposed by Sollis (2009) to investigate the Purchasing Power Parity (PPP) for China's real exchange rate vis-à-vis her nine trading partner countries over the period January 1986 to October 2009. The empirical results indicate that China's real exchange is a nonlinear process and a unit root in real exchange rate was not found for most of the cases under study. These results provide strong support for PPP for China relative to her major trading partner countries.

Suggested Citation

  • Tsangyao Chang, 2012. "Nonlinear adjustment to purchasing power parity in China," Applied Economics Letters, Taylor & Francis Journals, vol. 19(9), pages 843-848, June.
  • Handle: RePEc:taf:apeclt:v:19:y:2012:i:9:p:843-848
    DOI: 10.1080/13504851.2011.607111
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    File URL: http://hdl.handle.net/10.1080/13504851.2011.607111
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    References listed on IDEAS

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    1. Joon Y. Park & Mototsugu Shintani, 2016. "Testing For A Unit Root Against Transitional Autoregressive Models," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 57, pages 635-664, May.
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    1. repec:rjr:romjef:v::y:2017:i:4:p:166-181 is not listed on IDEAS
    2. repec:eei:journl:v:60:y:2017:i:2:p:14-38 is not listed on IDEAS
    3. Yavuz, Nilgün Çil & Yilanci, Veli, 2012. "Testing For Nonlinearity In G7 Macroeconomic Time Series," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 69-79, September.
    4. Phiri, Andrew, 2014. "Purchasing power parity (PPP) between South Africa and her main currency exchange partners: Evidence from asymmetric unit root tests and threshold co-integration analysis," MPRA Paper 53659, University Library of Munich, Germany.
    5. Andrew Phiri, 2017. "Nonlinear adjustment effects in the purchasing power parity," Journal of Economics and Econometrics, Economics and Econometrics Society, vol. 60(2), pages 14-38.

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