Eurasian Economists Association

International Conference on Eurasian Economies

17-18 September 2013 – St. Petersburg, RUSSIA

Paper detail

Paper ID : 594
Status : Paper published
Language : Turkish
Topic : Growth and Development
Presenter: Asst. Prof. Dr. Seymur Ağayev
Session : 3B Makroekonomi

The Validity of Purchasing Power Parity Hypothesis for Kazakhstan
Satın Alma Gücü Paritesi Hipotezinin Kazakistan İçin Geçerliliği

Abstract

The article examines the validity of Purchasing Power Parity (PPP) hypothesis for Kazakhstan by using the data set belonging to the period January 1995 to December 2012. Both linear and nonlinear unit root tests are used to make an econometrical investigation on stationarity characteristics of real exchange rate series of Kazakhstan’s Tenge that defined according to different foreign countries or country groups. First of two nonlinear unit root tests that applied in this paper models structural change as a smooth transition and the other nonlinear unit root test takes into account both structural change and asymmetric adjustment characteristics of real exchange rates. Linear unit root test findings support the validity of the PPP hypothesis between Kazakhstan and Commonwealth of Independent States (CIS) countries. In addition to this finding, unit root tests that allow for nonlinear adjustment support evidences on stationarity of Tenge – US dollar real exchange rate, Tenge – Euro real exchange rate and Tenge’s non-CIS related real effective exchange rate series. As a whole, findings of this study provide a strong support on the validity of PPP hypothesis for Kazakhstan. Furthermore, it is also shows that the nonlinear adjustment characteristics of real exchange rate should be taken into account, if foreign countries are represented by free market economies.

JEL codes: C22, F31

Ağayev, Seymur (2013). "The Validity of Purchasing Power Parity Hypothesis for Kazakhstan" in Proceedings of International Conference of Eurasian Economies 2013, pp.372-379, St. Petersburg, RUSSIA.

DOI: https://doi.org/10.36880/C04.00594

Full paper in PDF format.

Session 3B: Makroekonomi

Beykent University Turkish Central Bank TIKA