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Testing long-run validity of purchasing power parity for selected emerging market economies

Author

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  • Murat Doğanlar
  • Harun Bal
  • Mehmet Ozmen

Abstract

This study presents an empirical analysis of purchasing power parity for 10emerging market economies, namely Brazil, India, Indonesia, South Korea, Mexico, Pakistan, Peru, Philippines, South Africa and Turkey. This is done by using cointegration technique. Time series properties of nominal exchange rate and price series show that they are nonstationary. The exchange rate and price series do not appear to be cointegrated for most of the countries. We reject the validity of purchasing power parity for Brazil, India, Indonesia, Pakistan, Philippines, South Africa, South Korea and Turkey, but we can accept it for Mexico and Peru.

Suggested Citation

  • Murat Doğanlar & Harun Bal & Mehmet Ozmen, 2009. "Testing long-run validity of purchasing power parity for selected emerging market economies," Applied Economics Letters, Taylor & Francis Journals, vol. 16(14), pages 1443-1448.
    • Handle: RePEc:taf:apeclt:v:16:y:2009:i:14:p:1443-1448
    DOI: 10.1080/13504850701522817
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    Cited by:

    1. Ahmad, Ahmad Hassan & Aworinde, Olalekan Bashir, 2016. "The role of structural breaks, nonlinearity and asymmetric adjustments in African bilateral real exchange rates," International Review of Economics & Finance, Elsevier, vol. 45(C), pages 144-159.
    2. Olalekan Bashir Aworinde, 2014. "Are Bilateral Real Exchange Rates Stationary? Empirical Evidence from Nigeria," Economics Bulletin, AccessEcon, vol. 34(1), pages 271-286.
    3. Arize, Augustine C. & Malindretos, John & Ghosh, Dilip, 2015. "Purchasing power parity-symmetry and proportionality: Evidence from 116 countries," International Review of Economics & Finance, Elsevier, vol. 37(C), pages 69-85.
    4. Ntokozo Patrick Nzimande & Marcel Kohler, 2016. "On the Validity of Purchasing Power Parity: Evidence from Energy Exporting Sub-Saharan Africa Countries," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 66(3), pages 71-82, July-Sept.
    5. Ceyhun Can Ozcan & Ahmet Sahbaz & Ugur Ad?guzel & Saban Nazlioglu, 2014. "The Nature of Shocks to Turkish exchange rates: what panel approach says?," Proceedings of Economics and Finance Conferences 0401591, International Institute of Social and Economic Sciences.
    6. E. N. Gyamfi & E. F. Appiah, 2019. "Further evidence on the validity of purchasing power parity in selected African countries," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 43(2), pages 330-343, April.
    7. Mücahit Aydın, 2019. "Investigation of the Validity of Purchasing Power Parity Hypothesis with Fourier Unit Root Tests: The Case of Turkey," EKOIST Journal of Econometrics and Statistics, Istanbul University, Faculty of Economics, vol. 30(0), pages 35-48, June.
    8. Adiguzel, Ugur & Sahbaz, Ahmet & Ozcan, Ceyhun Can & Nazlioglu, Saban, 2014. "The behavior of Turkish exchange rates: A panel data perspective," Economic Modelling, Elsevier, vol. 42(C), pages 177-185.
    9. Bulent Guloglu & Serdar Ispira & Deniz Okat, 2011. "Testing the validity of quasi PPP hypothesis: evidence from a recent panel unit root test with structural breaks," Applied Economics Letters, Taylor & Francis Journals, vol. 18(18), pages 1817-1822, December.

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