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Modeling purchasing power parity using co-integration: evidence from Turkey

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  • Levent, Korap

Abstract

In this study, we consruct a co-integration model of the Turkish economy using high frequency data to examine the validity of the purchasing power parity (PPP) theory. The ex-post estimation results derived from the analysis of monthly observations for the January 1987 – December 2004 period generally support the use of the PPP theory in predicting the movement of currency values in the Turkish economy.The methodology developed in this study can be used in other countries to ensure the success of economic policies that depend on the existence of PPP relationship.

Suggested Citation

  • Levent, Korap, 2007. "Modeling purchasing power parity using co-integration: evidence from Turkey," MPRA Paper 19584, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:19584
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    File URL: https://mpra.ub.uni-muenchen.de/19584/1/MPRA_paper_19584.pdf
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    References listed on IDEAS

    as
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    Cited by:

    1. Levent KORAP, 2008. "Exchange Rate Determination Of Tl/Us$:A Co-Integration Approach," Istanbul University Econometrics and Statistics e-Journal, Department of Econometrics, Faculty of Economics, Istanbul University, vol. 7(1), pages 24-50, May.
    2. Ozgur Aslan & Levent Korap, 2009. "Are real exchange rates mean reverting? Evidence from a panel of OECD countries," Applied Economics Letters, Taylor & Francis Journals, vol. 16(1), pages 23-27.

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    More about this item

    Keywords

    Purchasing Poer Parity ; Cointegration ; Turkish Economy ;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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