A new combination of Fourier unit root tests: a PPP application for fragile economies

ZEREN F., Kizilkaya F.

APPLIED ECONOMICS LETTERS, vol.28, no.19, pp.1707-1711, 2021 (SSCI) identifier identifier

  • Publication Type: Article / Article
  • Volume: 28 Issue: 19
  • Publication Date: 2021
  • Doi Number: 10.1080/13504851.2020.1851647
  • Journal Name: APPLIED ECONOMICS LETTERS
  • Journal Indexes: Social Sciences Citation Index (SSCI), Scopus, IBZ Online, International Bibliography of Social Sciences, ABI/INFORM, Business Source Elite, Business Source Premier, CAB Abstracts, EconLit, Geobase, Public Affairs Index, Veterinary Science Database, DIALNET
  • Page Numbers: pp.1707-1711
  • Keywords: Unit root, time series, Fourier function, purchasing power parity, fragile economies
  • Inonu University Affiliated: Yes

Abstract

This study offers a new unit root test procedure that is based on the combination of Fourier ADF and Fourier KSS unit root tests by using Fisher's statistics. The main advantage of this approach is that it is a useful method, especially in cases where the findings obtained from the two test methods differ. In this paper, we investigate the mean-reverting properties of the real exchange rate series for seven fragile economies. Fourier ADF and Fourier KSS tests results point to different findings. When the combination unit root test is applied, it is confirmed that the real exchange rate series are stationary for four fragile economies, namely Brazil, India, Indonesia, and Mexico.