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In this study, we apply the generalized sup Augmented Dickey-Fuller (GSADF) test, a new recursive test proposed by Phillips et al. (2013) to investigate whether there exist multiple bubbles in the BRICS (Brazil, Russia, India, China and South Africa) stock markets, using monthly data on stock price-dividend ratio. Our empirical results indicate that there exist multiple bubbles in the stock markets of the BRICS. Further, the dates of the bubbles also correspond to specific events in the stocks markets of these economies. This finding has important economic and policy implications.

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We test the PPP hypothesis in 29 African countries using a newly developed nonlinear Quantile unit root test with a Fourier function which accounts for smooth breaks. Simulation indicates that the proposed new test has higher power than the conventional Quantile unit root test as proposed by Koneker and Xiao (2004). Our empirical results provide support for the PPP hypothesis in 21 out of 29 African countries, a unique discovery using their real effective exchange rates. It appears that incorporating Fourier function to nonlinear Quantile unit root test gets us closer and closer to solving the PPP puzzle in Africa.

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