REVISITING PURCHASING POWER PARITY IN EMERGING-7 COUNTRIES: A POWERFUL UNIT ROOT TEST

Contenido principal del artículo

Veli Yilanci
Uğur Ursavaş
Faruk Mike

Resumen

This paper introduces a newly developed unit root test procedure named the Fourier Quantile AESTAR (FAESTAR-QKS) test that allows nonlinearity and structural changes. The FAESTAR-QKS unit root test is mainly based on the quantile approach and provides more powerful results since it is robust toward non-normal errors. Then, we test the Purchasing Power Parity hypothesis (PPP) [or the mean-reverting properties of real exchange rates] in emerging seven (E7) countries (Brazil, China, India, Indonesia, Mexico, Russia, and Turkey) from 1995:1 to 2023:6 by using a novel FAESTAR-QKS test procedure. The results show that the FAESTAR-QKS unit root test provides more evidence on the validity of PPP than the traditional unit root test. Accordingly, the PPP hypothesis is valid in all E7 countries except for Turkey in the long run.


LA PARIDAD DEL PODER ADQUISITIVO EN LOS PAÍSES EMERGENTES (E7): UNA PRUEBA DE RAÍZ UNITARIA ROBUSTA


RESUMEN


Este artículo estima un método recientemente desarrollado llamado Fourier Quantile AESTAR (FAESTAR-QKS). Es una prueba de raíz unitaria que permite la no linealidad y los cambios estructurales. La FAESTAR-QKS se basa principalmente en un enfoque de cuantiles y dado que es más robusta frente a errores que no presentan una distribución normal proporciona resultados más eficaces. Con base en esta metodología probamos la hipótesis de la paridad de poder de compra (PPC) [o las propiedades de reversión de los tipos de cambio reales] en los países emergentes (E7), a saber: Brasil, China, India, Indonesia, México, Rusia y Turquía para el periodo 1995:1 a 2023:6. Los resultados muestran que la prueba de raíz unitaria FAESTAR-QKS proporciona evidencia más robusta sobre la validez de la PPC que la prueba de raíz unitaria convencional. Finalmente comprobamos que, a excepción de Turquía, la hipótesis de la PPC es válida en el largo plazo para la mayoría de los países analizados.

Detalles del artículo

Cómo citar
Yilanci, V., Ursavaş, U., & Mike, F. . (2024). REVISITING PURCHASING POWER PARITY IN EMERGING-7 COUNTRIES: A POWERFUL UNIT ROOT TEST. Investigación Económica, 83(328), 31–54. https://doi.org/10.22201/fe.01851667p.2024.328.86700

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