Revisiting Purchasing Power Parity in Emerging-7 Countries: A Powerful Unit Root Test
Veli Yilanci,
Uğur Ursavaş,
Faruk Mike
Abstract:This paper introduces a newly developed unit root test procedure named the Fourier Quantile AESTAR (FAESTAR-QKS) test that allows nonlinearity and structural changes. The FAESTAR-QKS unit root test is mainly based on the quantile approach and provides more powerful results since it is robust toward non-normal errors. Then, we test the Purchasing Power Parity hypothesis (PPP) [or the mean-reverting properties of real exchange rates] in emerging seven (E7) countries (Brazil, China, India, Indonesia, Mexico, Russ… Show more
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