Flexible Fourier stationary test in purchasing power parity for African countries

摘要

This study applies stationary test with a Fourier function proposed by Enders and Lee (200411. Enders, W and Lee, J. 2004. Testing for a unit root with a nonlinear Fourier function , Tuscaloosa, AL, , USA: Working Paper, Department of Economics, Finance and Legal Studies, University of Alabama. View all references, 200912. Enders, W and Lee, J. 2009. The flexible Fourier form and testing for unit roots: an example of the term structure of interest rates , Tuscaloosa, AL, , USA: Working Paper, Department of Economics, Finance and Legal Studies, University of Alabama. View all references) to test the validity of long run Purchasing Power Parity (PPP) to assess the nonstationary properties of the real exchange rate for 20 African countries. We find that our approximation has higher power to detect U shaped breaks and smooth breaks than linear method if the true data generating process of exchange rate is in fact a stationary nonlinear process. We examine the validity of PPP from the nonlinear point of view and provide robust evidence clearly indicate that PPP holds true for almost African countries. Our findings point out their exchange rate adjustment is mean reversion towards PPP equilibrium values in a nonlinear way.View full textDownload full textKeywordsFourier stationary test, structural change, trend breaks, purchasing power parityJEL Classification:C22, F31Related 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/10.1080/00036846.2011.570729