The Validity of Purchasing Power Parity in BRICS Countries

Abstract

It is observed that purchasing power parity (PPP) as one of the controversial and most interesting topics of international macroeconomics literature is tested by using different econometric methods for certain countries and/or country groups by many researchers. The validity of PPP is important in terms of being a common exchange rate used in international comparison. In this context, the validity of relative purchasing power parities in the BRICS countries (Brazil, Russia, India, China and South Africa) were analysed for the January 1993-March 2015 period. Non-linear stationarity analysis was used in the study. According to the findings of the analysis, it was concluded that all of the BRICS countries have a non-linear structure; the PPP approach was valid for Brazil and South Africa, but not valid for Russia, India and China in the relevant period.