Testing the validity of purchasing power parity in alternative markets: Evidence from the fourier quantile unit root test

Doğanlar M., Mike F., Kızılkaya O.

Borsa Istanbul Review, cilt.21, sa.4, ss.375-383, 2021 (SSCI) identifier

  • Yayın Türü: Makale / Tam Makale
  • Cilt numarası: 21 Sayı: 4
  • Basım Tarihi: 2021
  • Doi Numarası: 10.1016/j.bir.2020.12.004
  • Dergi Adı: Borsa Istanbul Review
  • Derginin Tarandığı İndeksler: Social Sciences Citation Index (SSCI), Scopus, EconLit, Directory of Open Access Journals
  • Sayfa Sayıları: ss.375-383
  • Anahtar Kelimeler: Fourier function, Purchasing power parity, Quantile unit root test
  • Hakkari Üniversitesi Adresli: Evet

Özet

This study analyzes the long-run validity of purchasing power parity (PPP) in three types of market economies—developed, emerging, and frontier markets—using the Fourier quantile unit root test. The analyses are conducted on 45 countries, including 10 developed, 20 developing, and 15 frontier market economies, using monthly observations from 1993:1 to 2018:8. Conventional, nonlinear, and Fourier-type unit root tests are also employed for this purpose. The Fourier quantile unit root test results provide more evidence than other tests on the validity of PPP, showing that it is valid in 8 developed, 11 emerging, and 7 frontier market economies.