Mean Reversion of Real Exchange Rates and Purchasing Power Parity in Turkey

Joseph Alba and Donghyun Park

No 530, Econometric Society 2004 Far Eastern Meetings from Econometric Society

Abstract: The important concept of purchasing power parity (PPP) has a number of practical implications. Our central objective is to examine the stationarity of Turkey’s real exchange rates to test for the empirical validity of PPP. Our results from conventional univariate unit root tests fail to support PPP. However, when we use the empirical methodology developed by Caner and Hansen (2001), which allows us to jointly consider non-stationarity and non-linearity, we find evidence of non-linear mean reversion in Turkey’s real exchange rates. This implies that PPP holds in one threshold regime but not in another.

Keywords: Turkey; purchasing power parity; real exchange rate; unit root; non-linearity (search for similar items in EconPapers)
JEL-codes: C5 F31 (search for similar items in EconPapers)
Date: 2004-08-11
New Economics Papers: this item is included in nep-cwa and nep-ifn
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://repec.org/esFEAM04/up.3587.1078899550.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecm:feam04:530

Access Statistics for this paper

More papers in Econometric Society 2004 Far Eastern Meetings from Econometric Society Contact information at EDIRC.
Bibliographic data for series maintained by Christopher F. Baum ().