Menu Expand

Cite JOURNAL ARTICLE

Style

Bahmani-Oskooee, M., Chang, T., Ranjbar, O. The Fourier Quantile Unit Root Test with an Application to the PPP Hypothesis in the OECD. Applied Economics Quarterly, 63(3), 295-318. https://doi.org/10.3790/aeq.63.3.295
Bahmani-Oskooee, Mohsen; Chang, Tsangyao and Ranjbar, Omid "The Fourier Quantile Unit Root Test with an Application to the PPP Hypothesis in the OECD" Applied Economics Quarterly 63.3, , 295-318. https://doi.org/10.3790/aeq.63.3.295
Bahmani-Oskooee, Mohsen/Chang, Tsangyao/Ranjbar, Omid: The Fourier Quantile Unit Root Test with an Application to the PPP Hypothesis in the OECD, in: Applied Economics Quarterly, vol. 63, iss. 3, 295-318, [online] https://doi.org/10.3790/aeq.63.3.295

Format

The Fourier Quantile Unit Root Test with an Application to the PPP Hypothesis in the OECD

Bahmani-Oskooee, Mohsen | Chang, Tsangyao | Ranjbar, Omid

Applied Economics Quarterly, Vol. 63 (2017), Iss. 3 : pp. 295–318

24 Citations (CrossRef)

Additional Information

Article Details

Pricing

Author Details

Mohsen, Bahmani-Oskooee, The Center for Research on International Economics and Department of Economics, University of Wisconsin-Milwaukee, Milwaukee, USA.

Department of Finance, Feng Chia University, Taichung, Taiwan.

Allameh Tabataba’i University and Trade Promotion Organization of Iran, Teheran, Iran.

Cited By

  1. Testing the long-run PPP for Turkey: new evidence from the Fourier quantile unit root test

    Doğanlar, Murat | Kızılkaya, Oktay | Mike, Faruk

    Applied Economics Letters, Vol. 27 (2020), Iss. 9 P.729

    https://doi.org/10.1080/13504851.2019.1644435 [Citations: 9]
  2. Analyzing slowdown and meltdowns in the African countries: New evidence using Fourier quantile unit root test

    Lee, Yi-Lung | Ranjbar, Omid | Jahangard, Fateme | Chang, Tsangyao

    International Review of Economics & Finance, Vol. 65 (2020), Iss. P.187

    https://doi.org/10.1016/j.iref.2019.10.008 [Citations: 5]
  3. REVISITING PURCHASING POWER PARITY IN EMERGING-7 COUNTRIES: A POWERFUL UNIT ROOT TEST

    Yilanci, Veli | Ursavaş, Uğur | Mike, Faruk

    Investigación Económica, Vol. 83 (2024), Iss. 328 P.31

    https://doi.org/10.22201/fe.01851667p.2024.328.86700 [Citations: 0]
  4. Popularity of Unit Root Tests: A Review

    Rath, Badri Narayan | Akram, Vaseem

    Asian Economics Letters, Vol. 2 (2021), Iss. 4

    https://doi.org/10.46557/001c.24141 [Citations: 4]
  5. Fourier nonlinear quantile unit root test and PPP in Africa

    Bahmani‐Oskooee, Mohsen | Chang, Tsangyao | Niroomand, Farhang | Ranjbar, Omid

    Bulletin of Economic Research, Vol. 72 (2020), Iss. 4 P.451

    https://doi.org/10.1111/boer.12230 [Citations: 16]
  6. Analyzing the hysteresis properties and growth stability of renewable energy production of the U.S

    Lee, Chien-Chiang | Ranjbar, Omid | Lee, Chi-Chuan

    Applied Economics, Vol. 53 (2021), Iss. 24 P.2752

    https://doi.org/10.1080/00036846.2020.1869168 [Citations: 8]
  7. Degree of persistence of energy mix diversification of the US states: fresh evidence using LM unit root tests with sharp or smooth breaks and cross-sectional dependence

    Chang, Tsangyao | Wang, Mei-Chih | Jia, Linyu | Ranjbar, Omid

    Environmental Science and Pollution Research, Vol. 30 (2023), Iss. 39 P.91415

    https://doi.org/10.1007/s11356-023-28662-y [Citations: 2]
  8. Investigating the persistence of shocks on the ecological balance: Evidence from G10 and N11 countries

    Pata, Ugur Korkut | Yilanci, Veli

    Sustainable Production and Consumption, Vol. 28 (2021), Iss. P.624

    https://doi.org/10.1016/j.spc.2021.06.027 [Citations: 24]
  9. What is the nature of responses of energy security to shocks in the E7 countries? Fresh evidence by applying unit root tests

    Liao, Li-Chuan | Chang, Tsangyao | Ranjbar, Omid

    Applied Economics, Vol. (2024), Iss. P.1

    https://doi.org/10.1080/00036846.2024.2309467 [Citations: 0]
  10. Fourier Nonlinear Quantile Unit Root Test of Purchasing Power Parity in cryptocurrencies

    Goswami, Gour Gobinda | Saha, Tapas Kumar

    Applied Economics Letters, Vol. 31 (2024), Iss. 4 P.312

    https://doi.org/10.1080/13504851.2022.2132205 [Citations: 0]
  11. OECD ÜLKELERİNDE SATIN ALMA GÜCÜ PARİTESİNİN GEÇERLİLİĞİNİN ANALİZİ

    AY, İsmail Cem

    Iğdır Üniversitesi Sosyal Bilimler Dergisi, Vol. (2021), Iss. P.180

    https://doi.org/10.54600/igdirsosbilder.991721 [Citations: 0]
  12. Towards resolving the purchasing power parity (PPP) ‘Puzzle’ in newly industrialized countries (NIC’s)

    De Villiers, David | Phiri, Andrew

    The Journal of International Trade & Economic Development, Vol. 31 (2022), Iss. 2 P.161

    https://doi.org/10.1080/09638199.2021.1964581 [Citations: 1]
  13. Revisiting purchasing power parity in the ASEAN-5 countries: evidence from the Fourier quantile unit root test

    Bahramian, Pejman | Saliminezhad, Andisheh

    Applied Economics Letters, Vol. 28 (2021), Iss. 13 P.1104

    https://doi.org/10.1080/13504851.2020.1803473 [Citations: 7]
  14. Revisiting Purchasing Power Parity in OECD Countries: New Evidence from Nonlinear Unit Root Test with Structural Breaks

    UĞUR, Mehmet Sedat | ALPER, Ali Eren

    Sosyoekonomi, Vol. 31 (2023), Iss. 57 P.25

    https://doi.org/10.17233/sosyoekonomi.2023.03.02 [Citations: 0]
  15. Testing the validity of purchasing power parity in alternative markets: Evidence from the fourier quantile unit root test

    Doğanlar, Murat | Mike, Faruk | Kızılkaya, Oktay

    Borsa Istanbul Review, Vol. 21 (2021), Iss. 4 P.375

    https://doi.org/10.1016/j.bir.2020.12.004 [Citations: 9]
  16. Persistence of Shocks on Sectoral Non-Methane Volatile Organic Compound from 1820 to 2019: Insights from a Fourier Quantile Unit Root Test

    Solarin, Sakiru Adebola | Pata, Ugur Korkut | Erdogan, Sinan | OKUMUS, İlyas

    SSRN Electronic Journal , Vol. (2022), Iss.

    https://doi.org/10.2139/ssrn.4166138 [Citations: 0]
  17. Testing the theory of PPP for emerging market economies that practice flexible exchange rate regimes

    Mike, Faruk | Kızılkaya, Oktay

    Applied Economics Letters, Vol. 26 (2019), Iss. 17 P.1411

    https://doi.org/10.1080/13504851.2018.1564111 [Citations: 16]
  18. Testing the persistence of shocks on renewable energy consumption: Evidence from a quantile unit-root test with smooth breaks

    Lee, Chien-Chiang | Ranjbar, Omid | Lee, Chi-Chuan

    Energy, Vol. 215 (2021), Iss. P.119190

    https://doi.org/10.1016/j.energy.2020.119190 [Citations: 25]
  19. Analyzing the degree of persistence of economic policy uncertainty using linear and non‐linear fourier quantile unit root tests

    Peng, Yi‐Ting | Chang, Tsangyao | Ranjbar, Omid

    The Manchester School, Vol. 90 (2022), Iss. 4 P.453

    https://doi.org/10.1111/manc.12410 [Citations: 2]
  20. REAL INTEREST RATE PARITY AND FOURIER QUANTILE UNIT ROOT TEST

    Bahmani‐Oskooee, Mohsen | Chang, Tsangyao | Elmi, Zahra (Mila) | Ranjbar, Omid

    Bulletin of Economic Research, Vol. 71 (2019), Iss. 3 P.348

    https://doi.org/10.1111/boer.12177 [Citations: 8]
  21. Persistence of shocks on sectoral non-methane volatile organic compound from 1820 to 2019: Insights from a fourier quantile unit root test

    Solarin, Sakiru Adebola | Pata, Ugur Korkut | Erdogan, Sinan | Okumus, Ilyas

    Journal of Environmental Management, Vol. 325 (2023), Iss. P.116436

    https://doi.org/10.1016/j.jenvman.2022.116436 [Citations: 3]
  22. Satınalma Gücü Paritesinin OECD Ülkeleri için Test Edilmesi: Fourier Kantil Birim Kök Testinden Bulgular

    KIZILKAYA, Oktay | MİKE, Faruk

    İzmir İktisat Dergisi, Vol. 36 (2021), Iss. 1 P.97

    https://doi.org/10.24988/ije.202136107 [Citations: 0]
  23. Testing the validity of purchasing power parity for China: Evidence from the Fourier quantile unit root test

    Chan, Kenneth S. | Lai, Jennifer T. | Liang, Xiaoyi

    Review of International Economics, Vol. 31 (2023), Iss. 2 P.464

    https://doi.org/10.1111/roie.12634 [Citations: 1]
  24. Are regional house prices stationary in Iran? New evidence using Fourier quantile unit root test

    Hadizadeh, Arash

    International Journal of Housing Markets and Analysis, Vol. 12 (2019), Iss. 5 P.849

    https://doi.org/10.1108/IJHMA-11-2018-0088 [Citations: 0]

References

  1. Alba, J. D. / Park, D. (2003): “Purchasing Power Parity in Developing Countries: Multi-Period Evidence under the Current Float”, World Development 31, 2049–2060.  Google Scholar
  2. Bahmani-Oskooee, M. (1992): “A Time-Series Approach to Test the Productivity Bias Hypothesis in Purchasing Power Parity”, Kyklos 45, 227–236.  Google Scholar
  3. Bahmani-Oskooee, M. (1993): “Purchasing Power Parity Based on Effective Exchange Rate and Cointegration: 25 LDCs’ Experience with its Absolute Formulation”, World Development 21, 1023–1031.  Google Scholar
  4. Bahmani-Oskooee, M. (1995): “Real Effective Exchange Rates and the Purchasing Power Parity: Experiences of 19 Industrial Countries”, Economic Notes24, 239–250.  Google Scholar
  5. Bahmani-Oskooee, M. / Hegerty, S. (2009): “Purchasing Power Parity in Less-Developed and Transition Economies: A Review Article”, Journal of Economic Surveys23, 617–658.  Google Scholar
  6. Bahmani-Oskooee, M., / Kutan, A. M. /  Zhou, S. (2008): “Do Real Exchange Rates Follow a Non-Linear Mean Reverting Process in Developing Countries?” Southern Economic Journal 74, 1049–1062.  Google Scholar
  7. Bahmani-Oskooee, M. / Ranjbar, O. (2016): “Quantile Unit Root Test and PPP: Evidence from 23 OECD Countries”, Applied Economics48, 2899–2911.  Google Scholar
  8. Bahmani-Oskooee, M. / Jiang, C. / Chang, T. (2015): “Revisiting Purchasing Power Parity in OECD”, Applied Economics47, 4323–4334.  Google Scholar
  9. Bai, J. / Perron, P. (2003), “Critical values for multiple structural change tests”, Econometrics Journal 6, 72–78.  Google Scholar
  10. Becker, R. / Enders, W. / Lee, J., (2004): A general test for time dependence in parameters, Journal of Applied Econometrics 19, 899–906.  Google Scholar
  11. Bierens, H. J. (1997), Testing the unit root with drift hypothesis against nonlinear trend stationarity, with an application to the us price level and interest rate, Journal of Econometrics 81 (1), 29–64.  Google Scholar
  12. Chang, T. / Chiu, C.-C. / Tzeng, H.-W. (2011): Revisting Purchasing power parity for nine transition countries using the Rank Test for nonlinear cointegration, Romanian Journal of Economic Forecasting 14, 19–30.  Google Scholar
  13. Christopoulos, D. K. / León-Ledesma, M. A. (2010): “Smooth breaks and non-linear mean reversion: Post-Bretton Woods real exchange rates,” Journal of International Money and Finance 29, 1076–1093.  Google Scholar
  14. Corbae, D./ Ouliaris, S. (1988): “Cointegration and Tests of Purchasing Power Parity”, The Review of Economics and Statistics 70, 508–511.  Google Scholar
  15. Corbae, D./ Ouliaris, S. (1991): “A Test of Long-run Purchasing Power Parity Allowing for Structural Breaks”, The Economic Record 67, 26–33.  Google Scholar
  16. Frenkel, J. A. (1978): “Purchasing power parity: Doctrinal perspective and evidence from the 1920s”, Journal of International Economics 25, 169–191.  Google Scholar
  17. Frenkel, J. A. (1981): “The collapse of PPP during the 1970’s”, European Economic Review 16, 145–165.  Google Scholar
  18. Gallant, R. (1981): On the basis in flexible functional form and an essentially unbiased form: The flexible Fourier form, Journal of Econometrics 15, 211–353.  Google Scholar
  19. Jarque, C. M. / Bera, A. K. (1980): “Efficient tests for normality, homoscedasticity and serial independence of regression residuals“. Economics Letters 6, 255–259.  Google Scholar
  20. Kapetanios, G. / Shin, Y. / Snell, A. (2003): “Testing for a unit root in the nonlinear STAR Framework”, Journal of Econometrics 112, 359–379.  Google Scholar
  21. Karfakis, C. / Moschos, D. (1989): “Testing for long run purchasing power parity: A time series analysis for Greek Drachmas”, Economic Letters 30, 245–248.  Google Scholar
  22. Kim, Y. (1990): “Purchasing power parity in the long run: A Cointegration approach”, Journal of Money, Credit and Banking 22, 401 – 403.  Google Scholar
  23. Koenker, R. / Xiao, Z. (2004): Unit root quantile autoregression inference. Journal of the American Statistical Association 99 (467), 775 – 787.  Google Scholar
  24. Kwiatkowski, D. / Phillips, P. C. B. / Schmidt, P. J. / Shin, Y. (1992): “Testing the null hypothesis of stationarity against the alternative of a unit root: how sure are we that economic time series have a unit root”. Journal of Econometrics 54, 159 – 178.  Google Scholar
  25. Layton, A. P. / Stark, J. P. (1990): “Co-integration as an empirical Test of Purchasing Power Parity”, Journal of Macroeconomics 12, 125 – 136.  Google Scholar
  26. McKnown, R. / Wallace, M. S. (1989): “National Price Levels, Purchasing Power Parities, and Cointegration,” Journal of International Money and Finance 8, 533 – 545.  Google Scholar
  27. Officer, L. H. (1978): “The relationship between absolute and relative purchasing power parity,” The Review of Economics and Statistics 60, 562 – 568.  Google Scholar
  28. Papell, D. / Theodoridis, H. (2001): “The Choice of Numeraire Currency in Panel Tests of Purchasing Power Parity”, Journal of Money, Credit and Banking 33, 790 – 803.  Google Scholar
  29. Perron, P. (1989): “The Great Crash, the oil Price Shock, and the Unit Root Hypothesis”, Econometrica 57, 1361 – 1401.  Google Scholar
  30. Sarno, L. / Taylor, M. P. / Chowdhury, I. (2004): “Nonlinear dynamics in deviations from the law of one price: a broad-based empirical study”, Journal of International Money and Finance 23 (1), 1 – 25.  Google Scholar
  31. Sjolander, P. (2007): Unreal exchange rates: a simulation based approach to adjust misleading PPP estimates, Journal of Economic Studies 34, 256-–288.  Google Scholar
  32. Taylor, M. P. (1988): “An Empirical Examination of Long-Run Purchasing Power Parity Using Cointegration Techniques”, Applied Economics 20, 1369 – 1381.  Google Scholar
  33. Taylor, M. P. / Peel, D. A. / Sarno, L. (2001): “Nonlinear mean-Reversion in real exchange rates: Toward a solution to the Purchasing Power Parity puzzles”, International Economics Review 42 (4), 1015 – 1042.  Google Scholar

Abstract

Abstract

With the introduction of new unit root tests, old theories receive a renewed attention. Quantile unit root test and Purchasing Power Parity (PPP) is no exception. However, we take an additional step and combine the quantile unit root test with smooth unknown multiple breaks through a Fourier expansion and test the PPP hypothesis in each of the 23 OECD countries. The new test yields support for the PPP in most countries in the sample, bringing us closer to solving the PPP puzzle.

JEL classifications: C22, F31

Keywords: Purchasing Power Parity, Quantile Unit Root Test, Smooth Breaks, Fourier Function, OECD