PURCHASING POWER PARITY IN AFRICAN COUNTRIES: FURTHER EVIDENCE FROM FOURIER UNIT ROOT TESTS BASED ON LINEAR AND NONLINEAR MODELS

Veli Yılancı · Zehra Ayca Eris

44 citations0/0 files storedSouth African Journal of Economics

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Abstract

Abstract This paper examines the validity of purchasing power parity hypothesis for 33 African countries using recently developed Fourier unit root tests by Christopoulos and León‐Ledesma that account for the existence of multiple breaks in the real exchange rates. The results support the evidence of the PPP in 20 countries, showing that most of the real exchange rates in the selected countries are characterised by linear or nonlinear stationary around multiple temporary mean changes.

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References

1996The Purchasing Power Parity Puzzle 2002Testing for a unit root in the nonlinear STAR framework 2003The Economics of Exchange Rates 1988Tests For Unit Roots: A Monte Carlo Investigation 2001Nonlinear Mean‐Reversion in Real Exchange Rates: Toward a Solution To the Purchasing Power Parity Puzzles 2006A Stationarity Test in the Presence of an Unknown Number of Smooth Breaks 2001Official Intervention in the Foreign Exchange Market: Is It Effective and, If So, How Does It Work?2003Why is it so difficult to beat the random walk forecast of exchange rates?

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2020Fourier nonlinear quantile unit root test and PPP in Africa 2016Testing the Validity of PPP Theory for Turkey: Nonlinear Unit Root Testing

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