Mean Reversion In Real Exchange Rate: Empirical Evidence From Turkey, 1980-1999

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2004-12

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Özdemir, Zeynel Abidin

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Purchasing Power Parity (PPP) is one of the most important theoretical relations in international economics. Its empirical measurement, nevertheless, is under discussion. This paper investigates the mean-reversion in bilateral real exchange rate series for lira-dollar (TL/USD), lira-mark (TL/DM), lira-sterling (TL/BP) and lira-franc (TL/FF). The results of the semiparametric estimates show that biletarel real exchange rates have a long memory and are mean reverting processes. On the other hand, the results of the parametric estimates suggest that real TL/USD rate, real TL/DM rate, real TL/BP rate and the real TL/FF rate series are mean reverting processes. Empirical results of both the semiparametric and parametric estimates indicate that the PPP for Turkey can be viewed as a long-run proposition.

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http://www2.feas.metu.edu.tr/metusd/ojs/index.php/metusd/article/view/45
https://hdl.handle.net/11511/58506

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ODTÜ Gelişme Dergisi

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Department of Economics, Article

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Citation Formats

Z. A. Özdemir, “Mean Reversion In Real Exchange Rate: Empirical Evidence From Turkey, 1980-1999,” ODTÜ Gelişme Dergisi, vol. 31, no. 2, pp. 243–265, 2004, Accessed: 00, 2020. [Online]. Available: http://www2.feas.metu.edu.tr/metusd/ojs/index.php/metusd/article/view/45.