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Revisiting purchasing power parity in BRICS countries using more powerful quantile unit-root tests with stationary covariates

Author

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  • Hongfeng Peng
  • Zhijie Liu
  • Tsangyao Chang

Abstract

This study contributes to this line of research by determining whether purchasing power parity (PPP) holds true in BRICS countries (i.e., Brazil, Russia, India, China, and South Africa). We test the hypothesis of PPP in real exchange rate using a more powerful quantile unit-root test with stationary covariates. Our empirical findings indicate a support of PPP for all BRICS countries under study. Our study has important policy implications for the government of the BRICS countries conducting exchange rate policy through PPP.

Suggested Citation

  • Hongfeng Peng & Zhijie Liu & Tsangyao Chang, 2017. "Revisiting purchasing power parity in BRICS countries using more powerful quantile unit-root tests with stationary covariates," Communications in Statistics - Theory and Methods, Taylor & Francis Journals, vol. 46(20), pages 10051-10057, October.
    • Handle: RePEc:taf:lstaxx:v:46:y:2017:i:20:p:10051-10057
    DOI: 10.1080/03610926.2016.1228968
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    Cited by:

    1. Kai-Hua WANG & Chi-Wei SU & Hsu-Ling CHANG & Ji MA & Cristina IOVU, 2017. "Purchasing Power Parity In China: An Empirical Investigation Based On Bootstrap Rollingwindow Test," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 166-181, December.
    2. 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.
    3. Bonga-Bonga, Lumengo, 2023. "Do trade frictions distort the purchasing power parity (PPP) hypothesis? A closer look," MPRA Paper 119196, University Library of Munich, Germany.
    4. Hendriks, Johannes Jurgens & Bonga-Bonga, Lumengo, 2022. "Testing for the purchasing power parity (PPP) hypothesis between South Africa and its main trading partners: application of the quantile approach," MPRA Paper 112915, University Library of Munich, Germany.

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