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PPP in the 34 OECD countries: evidence from quantile-based unit root tests with both smooth and sharp breaks

Mohsen Bahmani-Oskooee () and Tsung-Pao Wu

Applied Economics, 2018, vol. 50, issue 23, 2622-2634

Abstract: Conventional unit root tests have mostly failed to validate the PPP. Quantile-based unit root tests by previous research have provided some support for the PPP. In this article, we take an additional step and incorporate sharp shifts and smooth breaks into the quantile-based unit root test and re-examine the PPP in each of the 34 OECD countries over the period 1994:01–2016:03. We find support for the PPP in 18 countries of Austria, Chile, Estonia, Finland, France, Germany, Italy, Korea, Mexico, Netherlands, New Zealand, Poland, Portugal, Slovenia, Sweden, Switzerland, Turkey and the United Kingdom.

Date: 2018
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