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The Fourier Quantile Unit Root Test with an Application to the PPP Hypothesis in the OECD

Mohsen Bahmani-Oskooee (), Tsangyao Chang () and Omid Ranjbar

Applied Economics Quarterly (formerly: Konjunkturpolitik), 2017, vol. 63, issue 3, 295-317

Abstract: With the introduction of new unit root tests, old theories receive a renewed attention. Quantile unit root test and Purchasing Power Parity (PPP) is no exception. However, we take an additional step and combine the quantile unit root test with smooth unknown multiple breaks through a Fourier expansion and test the PPP hypothesis in each of the 23 OECD countries. The new test yields support for the PPP in most countries in the sample, bringing us closer to solving the PPP puzzle.

Keywords: Purchasing Power Parity; Quantile Unit Root Test; Smooth Breaks; Fourier Function; OECD (search for similar items in EconPapers)
Date: 2017
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Applied Economics Quarterly (formerly: Konjunkturpolitik) is currently edited by Ansgar Belke, Christian Dreger and Daniel Gros

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Handle: RePEc:dah:aeqaeq:v63_y2017_i3_q3_p_295-317