Is there a Purchasing Power Parity (PPP) Puzzle? New Evidence from a Nonlinear Asymmetric Panel Unit Root Test

2016 ◽  
Vol 27 (99) ◽  
pp. 237
Author(s):  
Aysegul Corakci
Keyword(s):  
Purchasing Power Parity ◽  
Unit Root ◽  
Unit Root Test ◽  
Purchasing Power ◽  
Power Parity ◽  
Panel Unit Root Test ◽  
Panel Unit Root ◽  
New Evidence

scholarly journals Purchasing Power Parity in Commonwealth of Independent States

2014 ◽  
Author(s):  
Gülçin Güreşçi Pehlivan ◽  
Esra Ballı ◽  
Muammer Tekeoğlu
Keyword(s):  
Time Series ◽  
Panel Data ◽  
Cross Section ◽  
Purchasing Power Parity ◽  
Unit Root ◽  
Unit Root Test ◽  
Purchasing Power ◽  
Power Parity ◽  
Panel Unit Root ◽  
Independent States

The Purchasing Power Parity suggests that differences in relative prices in two countries move together with nominal exchange rates in the long run. This study examines the validity of PPP as transition economies for Commonwealth of Independent States (CIS). Purchasing Power Parity holds only when the real exchange rate is stationary in the equation. To test the stationary, we used both time series and panel data analysis. Testing unit root both with time series and panel data in this study, provides us double check of the results. We also test the cross sectional dependence to choose the appropriate panel unit root test. Our test statistics indicate that there is cross section dependence between countries. Hence, one needs to take into consideration the cross section dependence while undertaking unit root tests. Otherwise, the results would be biased. ADF and KPPS indicate that PPP cannot be accepted for the countries except for Russia. According to the panel unit root test results indicate that PPP does not hold for Armenia, Belarus, Georgia, Kazakhstan and Kyrgyzstan except for Russia.

scholarly journals IS CHINA INTEGRATED WITH HER MAJOR TRADING PARTNERS: EVIDENCE ON FINANCIAL AND REAL INTEGRATION / AR KINIJA INTEGRUOTA SU SAVO PAGRINDINIAIS PREKYBOS PARTNERIAIS: ĮRODYMŲ APIE FINANSINĘ IR REALIĄJĄ INTEGRACIJĄ PAIEŠKOS

2010 ◽  
Vol 16 (2) ◽  
pp. 173-187 ◽  
Author(s):  
Mehmet Huseyin Bilgin ◽  
Chi Keung Marco Lau ◽  
Manuela Tvaronavičienė
Keyword(s):  
Purchasing Power Parity ◽  
Unit Root ◽  
Unit Root Test ◽  
The United States ◽  
The European Union ◽  
Power Parity ◽  
Panel Unit Root Test ◽  
Cross Sectional ◽  
Panel Unit Root ◽  
Interest Parity

Applying the new panel unit root test developed in this paper, we can overcome the pitfalls of old‐fashioned panel unit root tests making it possible for researchers testing individual series for a unit root while taking contemporaneous cross‐sectional dependence and structural break into account. The proposed test was used to investigate the status of financial and real integration of China, Japan, UK, the European Union, and the United States based on the empirical validity of real interest parity, uncovered interest parity, and relative purchasing power parity. We found strong evidence in favor of those parity conditions and hence concluded that financial and real integration between China and the other four countries was well established using the new developed panel unit root test while the traditional tests (either univariate or panel) fail to do so. Santrauka Straipsnyje ieškoma rodymų apie finansinę ir realiąją integraciją tarp Kinijos bei jos tarptautinės prekybos partnerių. Autorių patobulinta ekonometrikos metodo (panel unit root test) versija leidžia ekonomistams atsižvelgti į nagrinėjamų šalių tarp šakinių ryšių bei ekonomikos struktūrų specifika. Finansinei bei realiai integracijai tarp Kinijos ir pagrindiniu jos prekybos partneriu, t. y. Japonijos, Jungtines Karalystes, Europos Sąjungos bei Jungtiniu Amerikos Valstijų, vertinti buvo naudoti tokie kintamieji, kaip nepadengtu palūkanų paritetas, palūkanų normų paritetas bei santykinis perkamosios galios paritetas. Tyrimo rezultatai patvirtino prielaida apie gana didelę minėtų paritetų svarba ir leido konstatuoti, kad Kinija yra gana stipriai finansiškai bei realiai integruota su savo pagrindinėmis prekybos partnerėmis.

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