PPP hypothesis and temporary structural breaks

Aysegul Corakcı (), Furkan Emirmahmutoglu and Tolga Omay
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Aysegul Corakcı: Cankaya Univeristy Department of Economics
Authors registered in the RePEc Author Service: Aysegul Eruygur

Economics Bulletin, 2017, vol. 37, issue 3, 1541-1548

Abstract: In this study our aim is to explore a better testing strategy for the PPP hypothesis under a temporary structural break. For this purpose we use the exponential smooth transition (EST) function in the unit root testing framework and compare this methodology with the one that uses a Fourier function. Although the Fourier function is extensively used in the literature to test the validity of the PPP hypothesis under temporary breaks, this investigation shows that it leads to misleading results.

Keywords: PPP; Quasi PPP; Temporary smooth break; EST function. (search for similar items in EconPapers)
JEL-codes: C1 F4 (search for similar items in EconPapers)
Date: 2017-07-08
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Citations: View citations in EconPapers (1)

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