Revisiting Purchasing Power Parity in OECD Countries: New Evidence from Nonlinear Unit Root Test with Structural Breaks

Authors : Mehmet Sedat UĞUR, Ali Eren ALPER

Pages : 25-45

Doi:10.17233/sosyoekonomi.2023.03.02

View : 217 | Download : 272

Publication Date : 2023-07-26

Article Type : Research Paper

Abstract :This study aims to investigate the purchasing power parity insert ignore into journalissuearticles values(PPP); hypothesis for 38 OECD member countries over the period 1994:M1-2021:M9 by performing Hepsag’s insert ignore into journalissuearticles values(2021); unit root test. It fills the gap in the literature since it is one of the first studies conducted performing a unit root test that considers structural change and nonlinearity for all OECD countries. The study, in which conventional unit root tests such as the ADF, KPSS, and the Fourier KPSS, which allow merely structural change, yield conflicting results regarding the validity of the PPP hypothesis, determines that the PPP hypothesis is valid for countries with stationary real effective exchange rates at the level such as Finland, France, Germany, Greece, Hungary, Iceland, Italy, Japan, Korea, Lithuania, Luxembourg, Mexico, Norway, Slovakia, Slovenia, Spain, Switzerland, Turkey, and the USA according to Hepsag’s insert ignore into journalissuearticles values(2021); unit root test results.
Keywords : Reel Efektif Döviz Kurları, OECD, Satın Alma Gücü Paritesi, Doğrusal Olmama, Yapısal Değişim, Birim Kök