Levent, Korap (2008): Testing international parity hypothesis in a multivariate identified cointegrating system: the Turkish evidence. Published in: İstanbul Üniversitesi Sosyal Bilimler Meslek Yüksek Okulu Sosyal Bilimler Dergisi , Vol. 2008, No. 1 (2008): pp. 129137.

PDF
MPRA_paper_20020.pdf Download (110Kb)  Preview 
Abstract
In this paper, a multivariate cointegrating model is constructed upon the Turkish economy to examine the validity of the purchasing power parity and the uncovered interest parity theories simultaneously. Estimation results obtained from the identified cointegrating vectors support a priori modelling expectations and yield evidence to the existence of both parities when integrated within each other. However, no evidence is obtained in favor of the two international exchange rate determination parity hypotheses when formulated in isolation. A policy inference derived from the paper can be summarized such that, since the market mechanisms seem to closely affect the longrun course of the nominal exchange rate, exchange rate based stabilization programs should be appreciated by economic agents in a cautious way.
Item Type:  MPRA Paper 

Original Title:  Testing international parity hypothesis in a multivariate identified cointegrating system: the Turkish evidence 
English Title:  Testing international parity hypothesis in a multivariate identified cointegrating system: the Turkish evidence 
Language:  English 
Keywords:  Purchasing Power Parity ; Uncovered Interest Parity ; Turkish Economy ; 
Subjects:  C  Mathematical and Quantitative Methods > C3  Multiple or Simultaneous Equation Models; Multiple Variables > C32  TimeSeries Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models F  International Economics > F3  International Finance > F32  Current Account Adjustment; ShortTerm Capital Movements F  International Economics > F4  Macroeconomic Aspects of International Trade and Finance > F41  Open Economy Macroeconomics 
Item ID:  20020 
Depositing User:  Levent Korap 
Date Deposited:  18. Jan 2010 07:51 
Last Modified:  12. Feb 2013 15:58 
References:  Banerjee, A, R.L. Lumsdaine, and J.H. Stock; (1992), “Recursive and Sequential tests of the Unit Root and Trend Break Hypothesis”, Journal of Business and Economic Statistics, 10, pp. 27187. Caporale, M.G., S. Kalyvitis, and N. Pittis; (2001), “Testing for PPP and UIP inan FIML Framework: Some Evidence for Germany and Japan”, Journal of Policy Modeling, 23, pp. 63750. Dornbusch, R.; (1976), “Expectations and Exchange Rate Dynamics”, Journal of Political Economy, 84(6), pp. 1161176. Gonzalo, J.; (1994), “Five Alternative Methods of Estimating Longrun Equilibrium Relationships”, Journal of Econometrics, 60, pp. 20333. Granger, C.W.J. and P. Newbold; (1974), “Spurious Regression in Economics”, Journal of Econometrics, 60, pp. 20333. Harris, R.I.D.; (1995), Using Cointegration Analysis in Econometric Modelling, Prentice Hall. Johansen, S.; (1988), “Statistical Analysis of Cointegration Vectors”, Journal of Economic Dynamics and Control, 12, pp. 23154. Johansen, S.; (1992), “Determination of Cointegration Rank in the Presence of a Linear Trend”, Oxford Bulletin of Econoics and Statistics, 54(3), pp. 38397. Johansen, S.; (1995), Likelihoodbased Inference in Cointegrated Vector Autoregressive Models, Oxford University Press. Johansen, S. and K. Juselius; (1990), “Maximum Likelihood Estimation and Inference on Cointegrationwith Applications to the Demand for Money”, Oxford Bulletin of Economics and Statistics, 52, pp. 169210. Johansen, S. and K. Juselius; (1992), “Testing Structural Hypotheses in a Multivariate Cointegration Analysis of the PPP and the UIP for UK”, Journal of Econometrics, 53, pp. 21144. Juselius, K.; (1995), “Do Purchasing Power Parity and Uncovered Interest Parity Hold in the Longrun? An Example of Likelihood Inference in a Multivariate Timeseries Model”, Journal of Econometrics, 69, pp. 21140. MacDonald, R; (2000), “Concepts to Calculate Equilibrium Exchange Rates: An Overview”, Economic Research Group of the Deutsche Bundesbank Discussion Paper, No. 3/00. Özem, E. and Gökcan, A.; (2004), “Deviations from PPP and UIP in a Financially Open Economy: The Turkish Evidence”, Applied Financial Economics, 14(11), pp. 77984. Perron, P.; (1989), “The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis”, Econometrica, 57, pp. 1361401. Perron, P.; (1990), “Testing for a Unit Root in a Time Series with Changing Mean”, Journal of Business and Economic Statistics, 8, pp. 15362. Zivot, E. and D.W.K. Andrews; (1992), “Further Evidence on Great Crash, the Oil Price Shock and the Unit Root Hypothesis”, Journal of Business and Economic Statistics, 10, pp. 25170. 
URI:  http://mpra.ub.unimuenchen.de/id/eprint/20020 