Nonlinear threshold unit root test and ppp in transition countries

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.

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Year of publication:	2015
Authors:	Bahmani-Oskooee, Mohsen ; Tsangyao Chang*
Published in:	Journal of Developing Areas. - College of Business. - Vol. 49.2015, 1, p. 177-186
Publisher:	College of Business
Subject:	PPP \| Transition Countries \| Threshold Unit Root Test \| Nonlinearity

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Type of publication:	Article
Classification:	C22 - Time-Series Models ; F31 - Foreign Exchange
Source:	RePEc - Research Papers in Economics

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