Purchasing power parity in Mainland China and Taiwan: an empirical note based on threshold unit root test

摘要

This empirical note applies the threshold unit root test proposed by Caner and Hansen (2001) to test the validity of long-run Purchasing Power Parity (PPP) in Mainland China and Taiwan over the period of January 1986 to October 2009. The empirical results indicate that PPP holds true for the two areas under study, and the adjustment towards PPP is found to be nonlinear.