Structural Changes and Purchasing Power Parity in Turkish Exchange Rates

Year 2019, Volume: 21 Issue: 1, 203 - 208, 20.03.2019

İlhan Küçükkaplan , Hüseyin Ağır , Çağın Karul , Ahmet Koncak

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. 

Structural Changes and Purchasing Power Parity in Turkish Exchange Rates

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. 

Keywords

PPP hypothesis, Structural shifts, Turkey

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