Reassessing PPP in BRICS-T economies: evidence from unit root quantile tests with smooth transitions

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Authors: Cemal Öztürk
Cited by: 0
References: 41

Abstract

Purpose This study investigates the validity of the purchasing power parity (PPP) hypothesis within the BRICS-T economies, focusing on both traditional members (Brazil, Russia, India, China, South Africa, Turkey) and newly added members (Saudi Arabia, Iran, Egypt, Ethiopia, United Arab Emirates). The research aims to address the structural shifts and non-normal errors that may influence PPP deviations. Design/methodology/approach The study applies advanced unit root tests, including Fourier-based tests (FADF and FQKS) and the residual augmented least squares ADF (RALS-ADF) test. These methods account for structural changes and deviations from normality in real exchange rate data across different quantiles and smooth transitions. Findings The empirical results show that while PPP holds in the long run for most BRICS-T countries, significant short-term deviations occur, particularly in response to economic shocks and policy changes. These deviations are more pronounced in countries experiencing major policy adjustments or economic disruptions. Practical implications The study emphasizes that policymakers should interpret PPP cautiously in the short term, given the impact of structural shifts and the distinct economic policies within BRICS-T countries. Investors should consider these dynamics when making investment decisions in these markets. Originality/value By incorporating smooth structural breaks and quantile-based analysis, this study enhances the understanding of real exchange rate behavior in emerging markets. It also broadens the literature by examining the validity of PPP in an expanded BRICS-T context, incorporating new member countries.

Fields of Study & Subjects

Monetary Policy and Economic Impact Global Financial Crisis and Policies Financial Markets and Investment Strategies

Publication details

Journal / source
International Journal of Emerging Markets
Volume
21
Issue
7
Pages
2207–2224
Publication date
28 January 2026
Language
EN