Linear and Nonlinear Cointegration of Purchasing Power Parity: Further Evidence from Developing Countries

Bozoklu S., Kutlu S.

GLOBAL ECONOMIC REVIEW, cilt.41, sa.2, ss.147-162, 2012 (SSCI) identifier identifier

  • Yayın Türü: Makale / Tam Makale
  • Cilt numarası: 41 Sayı: 2
  • Basım Tarihi: 2012
  • Doi Numarası: 10.1080/1226508x.2012.684470
  • Dergi Adı: GLOBAL ECONOMIC REVIEW
  • Derginin Tarandığı İndeksler: Social Sciences Citation Index (SSCI), Scopus
  • Sayfa Sayıları: ss.147-162
  • Anahtar Kelimeler: Purchasing power parity, non-linear cointegration, non-linearities, rank tests, developing countries, UNIT-ROOT TESTS, EXCHANGE-RATE, RANK-TESTS, ADJUSTMENT, INTERVENTION, EAST
  • İstanbul Üniversitesi Adresli: Evet

Özet

In this study, we search for evidence of empirical validity of long-run purchasing power parity (PPP) in case of eight developing countries. We consider both a linear and non-linear model of PPP based on cointegration analysis and apply firstly Johansen's linear approach and then conduct Breitung's rank and score tests to search for any non-linear cointegrating relationship. The results obtained from Breitung's rank test suggest that once the sources of non-linearities are taken into account, the results provide stronger evidence on the empirical fulfillment of PPP.