PPP test for Asian countries and regions: new evidence from a wild bootstrap AESTAR test

Shaoping Wang and Yang Yang

Applied Economics Letters, 2017, vol. 24, issue 14, 1046-1050

Abstract: This article investigates the effects of time-varying variance on the asymmetric exponential smooth transition autoregressive (AESTAR) unit root test. We propose a wild bootstrap-based implementation of the test, which is asymptotically valid under time-varying variance. We apply our proposed method to test the Purchasing Power Parity (PPP) hypothesis for Asian countries and regions, and find that our proposed test provides stronger evidence against the PPP hypothesis than the conventional AESTAR test.

Date: 2017
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DOI: 10.1080/13504851.2016.1248353

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