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Nonlinear threshold unit root test and ppp in transition countries

Author

Listed:
  • Mohsen Bahmani-Oskooee

    (University of Wisconsin-Milwaukee, USA)

  • Tsangyao Chang*

    (Feng Chia University, Taiwan)

Abstract

This study applies the threshold autoregressive (TAR) method proposed by Caner and Hansen (2001) to test the validity of long-run purchasing power parity (PPP) in 14 transition countries, using monthly real effective exchange rates over the period January 1994- June 2012. The empirical results indicate that PPP holds only in five countries (i.e., Cyprus, Lithuania, Latvia, Poland, and Slovenia). Furthermore, we found that the adjustment toward PPP is nonlinear.

Suggested Citation

  • Mohsen Bahmani-Oskooee & Tsangyao Chang*, 2015. "Nonlinear threshold unit root test and ppp in transition countries," Journal of Developing Areas, Tennessee State University, College of Business, vol. 49(1), pages 177-186, January-M.
    • Handle: RePEc:jda:journl:vol.49:year:2015:issue1:pp:177-186
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    File URL: http://muse.jhu.edu/journals/journal_of_developing_areas/v049/49.1.bahmani-oskooee.html
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    Cited by:

    1. repec:prg:jnlpep:v:preprint:id:654:p:1-10 is not listed on IDEAS
    2. Burak Güriş & Muhammed Tiraşoğlu, 2018. "The Validity of Purchasing Power Parity in BRICS Countries," Prague Economic Papers, Prague University of Economics and Business, vol. 2018(4), pages 417-426.

    More about this item

    Keywords

    PPP; Transition Countries; Threshold Unit Root Test; Nonlinearity.;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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