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Copyright License AgreementLicense Agreement • May 5th, 2020
Abstract: Unit root tests have been applied to Turkish real exchange rates to test the absolute version of the purchasing power parity (PPP) hypothesis. A survey of the evidence regarding the PPP hypothesis for Turkey, as given in Erlat (2003), indicates that it does not favour the PPP hypothesis. This evidence is based, to a great extend, on the Augmented Dickey-Fuller (ADF) test which known to have very low power. One of the alternatives suggested to deal with this problem is to implement panel unit root tests. This is what we set out to do in this paper and find, particularly when we take into account the dependence between the series, that we are still not able to find support for the PPP hypothesis in the case of Turkey.
Copyright License Agreement Presentation of the articles in the Topics in Middle Eastern and North African Economies was made possible by a limited license granted to Loyola University Chicago and Middle East Economics Association from the authors who...License Agreement • May 5th, 2020
Abstract: Unit root tests have been applied to Turkish real exchange rates to test the absolute version of the purchasing power parity (PPP) hypothesis. A survey of the evidence regarding the PPP hypothesis for Turkey, as given in Erlat (2003), indicates that it does not favour the PPP hypothesis. This evidence is based, to a great extend, on the Augmented Dickey-Fuller (ADF) test which known to have very low power. One of the alternatives suggested to deal with this problem is to implement panel unit root tests. This is what we set out to do in this paper and find, particularly when we take into account the dependence between the series, that we are still not able to find support for the PPP hypothesis in the case of Turkey.
