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Purchasing power parity in OECD countries: nonlinear unit root tests revisited

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  • Juan Carlos Cuestas
  • Paulo José Regis

Abstract

The aim of this paper is to provide additional evidence on the purchasing power parity empirical fulfillment in a pool of OECD countries. We apply the Harvey et al. (2008) linearity test and the Kruse (2010) nonlinear unit root test. The results point to the fact that the purchasing power parity theory holds in a greater number of countries than has been reported in previous studies.

Suggested Citation

  • Juan Carlos Cuestas & Paulo José Regis, 2010. "Purchasing power parity in OECD countries: nonlinear unit root tests revisited," NBS Discussion Papers in Economics 2010/3, Economics, Nottingham Business School, Nottingham Trent University.
  • Handle: RePEc:nbs:wpaper:2010/3
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    References listed on IDEAS

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    1. Obstfeld, Maurice & Rogoff, Kenneth, 1995. "Exchange Rate Dynamics Redux," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 624-660, June.
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    Citations

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    Cited by:

    1. Juan Carlos Cuestas & Mercedes Monfort & Javier Ordoñez, 2019. "Real exchange rates and competitiveness in Central and Eastern Europe: have they fundamentally changed?," Working Papers 2019/12, Economics Department, Universitat Jaume I, Castellón (Spain).
    2. Mücahit Aydın, 2019. "Investigation of the Validity of Purchasing Power Parity Hypothesis with Fourier Unit Root Tests: The Case of Turkey," EKOIST Journal of Econometrics and Statistics, Istanbul University, Faculty of Economics, vol. 30(0), pages 35-48, June.
    3. Robert Kelm, 2017. "The Purchasing Power Parity Puzzle and Imperfect Knowledge: The Case of the Polish Zloty," Central European Journal of Economic Modelling and Econometrics, Central European Journal of Economic Modelling and Econometrics, vol. 9(1), pages 1-27, March.
    4. Hwa-Taek Lee & Gawon Yoon, 2013. "Does purchasing power parity hold sometimes? Regime switching in real exchange rates," Applied Economics, Taylor & Francis Journals, vol. 45(16), pages 2279-2294, June.
    5. Xie, Zixiong & Chen, Shyh-Wei & Hsieh, Chun-Kuei, 2021. "Facing up to the polysemy of purchasing power parity: New international evidence," Economic Modelling, Elsevier, vol. 98(C), pages 247-265.
    6. Kai-Hua WANG & Chi-Wei SU & Hsu-Ling CHANG & Ji MA & Cristina IOVU, 2017. "Purchasing Power Parity In China: An Empirical Investigation Based On Bootstrap Rollingwindow Test," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 166-181, December.
    7. David de Villiers & Andrew Phiri, 2019. "Towards resolving the Purchasing Power Parity (PPP) ‘puzzle’ in Newly Industrialized Countries (NIC’s)," Working Papers 1908, Department of Economics, Nelson Mandela University, revised Sep 2019.
    8. Morrison, Michael & Fontenla, Matías, 2017. "Purchasing power parity across eight worlds," Economics Letters, Elsevier, vol. 158(C), pages 62-66.
    9. Juan Carlos Cuestas, 2019. "Quantile regressions, asymmetric adjustment and crisis: the case of EU real exchange rates," Working Papers 2019/09, Economics Department, Universitat Jaume I, Castellón (Spain).
    10. Seher Suluk & Kemaletttin Tanrýseven, 2018. "Purchasing Power Parity in the Euro Area: Evidence from Structural Break LM Test," International Journal of Economics and Financial Issues, Econjournals, vol. 8(2), pages 370-375.
    11. Cuestas, Juan Carlos & Regis, Paulo José, 2018. "On the dynamics of sovereign debt in China: Sustainability and structural change," Economic Modelling, Elsevier, vol. 68(C), pages 356-359.
    12. Moosa, Imad A. & Ma, Ming, 2018. "Linear and Nonlinear Attractors in Purchasing Power Parity," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 71(2), pages 149-172.
    13. Habimana, Olivier, 2018. "Asymmetry and Multiscale Dynamics in Macroeconomic Time Series Analysis," MPRA Paper 87823, University Library of Munich, Germany.

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    More about this item

    Keywords

    Real exchange rates; purchasing power parity; nonlinearities; unit root tests;
    All these keywords.

    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; State Space Models
    • F15 - International Economics - - Trade - - - Economic Integration

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