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Structural Changes and Purchasing Power Parity in Turkish Exchange Rates

Year 2019, Volume: 21 Issue: 1, 203 - 208, 20.03.2019
https://doi.org/10.32709/akusosbil.471934

Abstract

We re-examine the purchasing power parity (PPP) hypothesis for Turkey by concentrating on modelling structural changes as sharp (with dummy variables) and smooth (with a Fourier approximation) process. The results show (i) more evidence in favor of PPP hypothesis when structural changes are taken into account and (ii) modelling the shifts with different approaches plays a crucial role for policy implications. 

References

  • Adigüzel, U, Şahbaz, A., Özcan, C. C. and Nazlioğlu, Ş. (2014). “The Behavior of Turkish Exchange Rates: A Panel Data Perspective”, Economic Modelling, 42, pp. 117-185.
  • Bahmani-Oskooee, M., Chang, T., Liu W. C. (2014). “Revisiting Purchasing Power Parity in 34 OECD Countries: Sequential Panel Selection Method”, Applied Economics Letters 21(18), pp.1283-1287.
  • Becker, R., Enders, W. and Lee, J. (2006). “A Stationarity Test in The Presence of an Unknown Number of Smooth Breaks”, Journal of Time Series Analysis 27, pp. 381–409.
  • Carrion-I-Silvestre, J. L. and Sansó, A. (2007). “The KPSS Test with Two Structural Breaks”, Spanish Economic Review 9(2), pp. 105-127.
  • Dickey, D. A. and Fuller, W. A. (1981). “Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root”, Econometrica, 49, pp. 1057-1072.
  • Enders, W. and Lee, J. (2012). “The Flexible Fourier Form and Dickey-Fuller Type Unit Root Tests”, Economics Letters 117, pp. 196-199.
  • Karagöz, K. ve Saraç, B. (2016). “Testing the Validity of PPP Theory for Turkey: Nonlinear Unit Root Testing”, Procedia Economics and Finance 38, pp. 458 – 467.
  • Kurozumi, E. (2002). “Testing for Stationarity with a Break”, Journal of Econometrics 108(1), pp. 63-99.
  • Kwiatkowski, D., Phillips, P. C.B., Schmidt, P. and Shin, Y. (1992). “Testing the Null Hypothesis of Stationary against the Alternative of a Unit Root”, Journal of Econometrics 54, pp. 159–178.
  • Lee, J., Huang, C. J. and Shin, Y. (1997). “On Stationary Tests in the Presence of Structural Breaks”, Economics Letters 55, pp. 165-172.
  • Narayan, P. K. and POPP, S. (2010). “A New Unit Root Test with Two Structural Breaks in Level and Slope at Unknown Time”, Journal of Applied Statistics 37(9), pp. 1425-1438.
  • Perron, P. (1989). “The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis”, Econometrica 57, pp. 1361-1401.
  • Sul, D., Phillips, P. and Choi, C. (2005). “Prewhitening Bias in HAC Estimation”, Oxford Bulletin of Economics and Statistics 67(4), pp. 517-546.
  • Zivot, E. and Andrews, D.W.K. (1992). “Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis”, Journal of Business & Economics- Statistics 10, pp. 251-270.

Structural Changes and Purchasing Power Parity in Turkish Exchange Rates

Year 2019, Volume: 21 Issue: 1, 203 - 208, 20.03.2019
https://doi.org/10.32709/akusosbil.471934

Abstract

We re-examine the purchasing
power parity (PPP) hypothesis for Turkey by concentrating on modelling
structural changes as sharp (with dummy variables) and smooth (with a Fourier
approximation) process. The results show (i) more evidence in favor of PPP hypothesis
when structural changes are taken into account and (ii) modelling the shifts
with different approaches plays a crucial role for policy implications. 

References

  • Adigüzel, U, Şahbaz, A., Özcan, C. C. and Nazlioğlu, Ş. (2014). “The Behavior of Turkish Exchange Rates: A Panel Data Perspective”, Economic Modelling, 42, pp. 117-185.
  • Bahmani-Oskooee, M., Chang, T., Liu W. C. (2014). “Revisiting Purchasing Power Parity in 34 OECD Countries: Sequential Panel Selection Method”, Applied Economics Letters 21(18), pp.1283-1287.
  • Becker, R., Enders, W. and Lee, J. (2006). “A Stationarity Test in The Presence of an Unknown Number of Smooth Breaks”, Journal of Time Series Analysis 27, pp. 381–409.
  • Carrion-I-Silvestre, J. L. and Sansó, A. (2007). “The KPSS Test with Two Structural Breaks”, Spanish Economic Review 9(2), pp. 105-127.
  • Dickey, D. A. and Fuller, W. A. (1981). “Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root”, Econometrica, 49, pp. 1057-1072.
  • Enders, W. and Lee, J. (2012). “The Flexible Fourier Form and Dickey-Fuller Type Unit Root Tests”, Economics Letters 117, pp. 196-199.
  • Karagöz, K. ve Saraç, B. (2016). “Testing the Validity of PPP Theory for Turkey: Nonlinear Unit Root Testing”, Procedia Economics and Finance 38, pp. 458 – 467.
  • Kurozumi, E. (2002). “Testing for Stationarity with a Break”, Journal of Econometrics 108(1), pp. 63-99.
  • Kwiatkowski, D., Phillips, P. C.B., Schmidt, P. and Shin, Y. (1992). “Testing the Null Hypothesis of Stationary against the Alternative of a Unit Root”, Journal of Econometrics 54, pp. 159–178.
  • Lee, J., Huang, C. J. and Shin, Y. (1997). “On Stationary Tests in the Presence of Structural Breaks”, Economics Letters 55, pp. 165-172.
  • Narayan, P. K. and POPP, S. (2010). “A New Unit Root Test with Two Structural Breaks in Level and Slope at Unknown Time”, Journal of Applied Statistics 37(9), pp. 1425-1438.
  • Perron, P. (1989). “The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis”, Econometrica 57, pp. 1361-1401.
  • Sul, D., Phillips, P. and Choi, C. (2005). “Prewhitening Bias in HAC Estimation”, Oxford Bulletin of Economics and Statistics 67(4), pp. 517-546.
  • Zivot, E. and Andrews, D.W.K. (1992). “Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis”, Journal of Business & Economics- Statistics 10, pp. 251-270.
There are 14 citations in total.

Details

Primary Language English
Journal Section Articles
Authors

İlhan Küçükkaplan 0000-0001-6926-3659

Hüseyin Ağır 0000-0003-1642-2876

Çağın Karul 0000-0002-5856-930X

Ahmet Koncak 0000-0002-4445-6128

Publication Date March 20, 2019
Submission Date October 18, 2018
Published in Issue Year 2019 Volume: 21 Issue: 1

Cite

APA Küçükkaplan, İ., Ağır, H., Karul, Ç., Koncak, A. (2019). Structural Changes and Purchasing Power Parity in Turkish Exchange Rates. Afyon Kocatepe Üniversitesi Sosyal Bilimler Dergisi, 21(1), 203-208. https://doi.org/10.32709/akusosbil.471934

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