Does Purchasing Power Parity Hypothesis Hold for Latin American Countries?

Year 2016, Volume: 20 Issue: 2, 167 - 177, 30.12.2016

Harun Bal , Müge Manga Esra Ballı Mehmet Akif Destek

Abstract

This paper investigates the validity of Purchasing Power Parity utilizing Fourier unit root tests for the period of
2000m1-2015m2 for Brazil, Chile, Colombia and Mexico. The findings show that the Purchasing Power Parity is valid
in Brazil and Colombia in case of considering structural breaks. Additionally, Purchasing Power Parity holds for all
countries in case of structural breaks and nonlinearity.

Keywords

Purchasing power parity hypothesis, Structural breaks, Fourier series

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