INVESTIGACION ECONOMICA, cilt.83, sa.328, ss.81-104, 2024 (SSCI)
This paper introduces a newly developed unit root test procedure
named the Fourier quantile aestar (faestar-qks) test that allows
nonlinearity and structural changes. The faestar-qks unit root
test is mainly based on the quantile approach and provides more
powerful results since it is robust toward non-normal errors. Then,
we test the Purchasing Power Parity hypothesis (ppp) hypothesis (or
the mean-reverting properties of real exchange rates) in emerging
seven (E7) countries (Brazil, China, India, Indonesia, Mexico, Russia,
and Turkey) from 1995:1 to 2023:6 by using a novel faestar-qks
test procedure. The results show that the faestar-qks unit root test
provides more evidence on the validity of ppp than the traditional
unit root test. Accordingly, the ppp hypothesis is valid in all E7
countries except for Turkey in the long run.