Non-linear quantile unit root test and PPP: more evidence from Africa

Mohsen Bahmani‐Óskooee · Tsangyao Chang · Zahra Mila Elmi · Abera Gelan · Omid Ranjbar

17 citations0/0 files storedApplied Economics Letters

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Abstract

It is now a common practice to establish stationarity of the real exchange rate as a sign of purchasing power parity (PPP) hypothesis. In this article, we consider the real effective exchange rates of 29 African countries. When we apply conventional linear unit root tests, we find support for the PPP in eight countries. However, when we shift to the newly introduced non-linear quantile unit root test, support for the PPP increases to 15 countries.

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References

1988Testing for a Unit Root in Time Series Regression 1992Testing the null hypothesis of stationarity against the alternative of a unit root 1996Efficient Tests for an Autoregressive Unit Root 1992Efficient Tests for an Autoregressive Unit Root 1996The Purchasing Power Parity Puzzle 2002Testing for a unit root in the nonlinear STAR framework 2001Cointegration and Threshold Adjustment 2001Nonlinear Mean‐Reversion in Real Exchange Rates: Toward a Solution To the Purchasing Power Parity Puzzles

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2021PPP in emerging markets: evidence from Fourier non-linear quantile unit root analysis

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