Revisiting purchasing power parity in BRICS countries using more powerful quantile unit-root tests with stationary covariates |
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Authors: | Hongfeng Peng Zhijie Liu |
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Institution: | Department of Finance, Wuhan University, Wuhan, China |
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Abstract: | This study contributes to this line of research by determining whether purchasing power parity (PPP) holds true in BRICS countries (i.e., Brazil, Russia, India, China, and South Africa). We test the hypothesis of PPP in real exchange rate using a more powerful quantile unit-root test with stationary covariates. Our empirical findings indicate a support of PPP for all BRICS countries under study. Our study has important policy implications for the government of the BRICS countries conducting exchange rate policy through PPP. |
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Keywords: | BRICS countries purchasing power parity quantile unit-root test stationary covariates |
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