Purchasing power parity -- nonlinear threshold unit root test for transition countries

Siyue Liu, Dongxiang Zhang and Tsangyao Chang

Applied Economics Letters, 2012, vol. 19, issue 18, 1781-1785

Abstract: This study applies the Threshold Autoregressive (TAR) model proposed by Caner and Hansen (2001) to test the validity of long-run Purchasing Power Parity (PPP) of eight transition countries over the period January 1995 to October 2011. The empirical results indicate that PPP holds true for only one country (i.e. Romanian) under study and the adjustment towards PPP is found to be nonlinear.

Date: 2012
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DOI: 10.1080/13504851.2012.654905

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