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PURCHASING POWER PARITY HYPOTHESIS: NEW EMPIRICAL EVIDENCE F
Transcript of PURCHASING POWER PARITY HYPOTHESIS: NEW EMPIRICAL EVIDENCE F
The PPP is a theory about exchange rate determination. The most important determinant of exchange rates are the fact that in open economies the prices of traded goods should be the same everywhere after adjustment for custom duties and the cost of transportation.
Purchasing Power Parity
Gustav Cassel (1918)
The law of one price suggests that identical goods sell at the same price in two separate countries.
Law of One Price
The absolute purchasing power parity theory is an aggregated version of the law of one price.
Absolute Purchasing Power Parity
Purchasing Power Parity
Graduate School Of Social Sciences
Purchasing Power Parity Hypothesis:
New Empirical Evidence From Nonlinear Panel Unit Root Tests
Assist.Prof. Dr. Ayşegül Eruygur
September 22, 2014
Relative Purchasing Power Parity
The relative version of the purchasing power parity holds true if the ratio of two broadly defined price indice stays constant when corrected for changes in the exchange rate.
Linear Univariate Unit Root Tests
Linear Panel Unit Root Tests
Nonlinear Univariate Unit Root Tests
Nonlinear Panel Unit Root Tests
Augmented Dickey Fuller (ADF)Test
Phillips - Perron (PP) Test
Dickey Fuller Generalized Least Square (DF- GLS )Test
Kapetanios-Snell-Shin (KSS) Test
Leybourne, Newbold, Vougas (LNV) Test
Levin Lin Chu (LLC) Test
Im Pearson and Shin (IPS) Test
The Fisher –ADF Test
The Hadri Test
Uçar and Omay Test
Linear Univariate Unit Root Test Results
Rejection Test Result for Univariate Unit Root Test
Nonlinear KSS Unit Root Test Results
Linear Panel Unit Root Tests Results
Nonlinear Panel Unit Root Test Results
Rejection Test Result for Nonlinear Panel UO Unit Root Test
Rejection Test Result for KSS Unit Root Test
Linear Univariate Unit Root Tests Results
Nonlinear Univaraite Unit Root Test Results
Nonlinear UO Panel Unit Root Tests Results
Nonlinear LNV Unit Root Test Results
Rejection Test Result for LNV Unit Root Test
General Tests Results