The primary aim of this study is an attempt to determine whether the Purchasing Power Parity (PPP) hypothesis holds for those countries that have collectively come to be known as âBRICsâ, namely, Brazil, Russia, India and China. We use the momentum threshold cointegration tests (advanced by Enders and Siklos, 20018. Enders, W. and Siklos, P. L. 2001. Cointegration and threshold adjustment. Journal of Business Economics and Statistics , 19: 166-76. [Taylor & Francis Online], [Web of Science ®]View all references) to investigate whether any asymmetric adjustment is discernible for BRICs, and show that whilst the Engle-Granger test (which assumes only symmetric adjustment) fails to reveal any cointegrational relationship for BRICs, the threshold cointegration test (with asymmetric adjustment) provides clear evidence of long-run PPP for BRICs, with the notable exception of China. We conclude that asymmetric adjustment of nominal exchange rates plays an important role in eliminating deviations from long-run PPP.View full textDownload full textRelated var addthis_config = { ui_cobrand: "Taylor & Francis Online", services_compact: "citeulike,netvibes,twitter,technorati,delicious,linkedin,facebook,stumbleupon,digg,google,more", pubid: "ra-4dff56cd6bb1830b" }; Add to shortlist Link Permalink http://dx.doi.org/10.1080/00036840902817458
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