Akademik Veri Yönetim Sistemi
Cumhuriyet Üniversitesi İktisadi ve İdari Bilimler Dergisi, cilt.27, sa.1, ss.38-53, 2026 (TRDizin)
This study aims to test the validity of the Purchasing Power Parity
(PPP) hypothesis for Türkiye using monthly data for the period February
2001-July 2024. To this end, the Augmented Dickey-Fuller (ADF) test, a
conventional unit root test, and the Fractional Frequency Fourier ADF (FFFADF)
test, which can take into account multiple nonlinear structural breaks, are
applied. In the analysis, CPI- and D-PPI-based Real Effective Exchange Rates
(REERs) as well as CPI-adjusted REER variables for developing and developed
countries are analyzed separately. The ADF unit root tests do not provide
consistent results on the validity of the PPP hypothesis in Türkiye in the
relevant period. Since the ADF test ignores structural breaks, the FFFADF unit
root test, which is a more advanced technique, is used to test the validity of
the PPP hypothesis with stronger evidence. The FFFADF unit root test results
reveal that the PPP hypothesis is valid only for the CPI-based and CPI
developed countries-based REER definitions in Türkiye during the analyzed
period. This finding implies that the applicability of PPP is highly
conditional on the price index and trading partner group used. This concrete
and most important impact for the Turkish economy is that the long-run
stabilizing feature of the REER supports the effectiveness of the Inflation
Targeting Regime, allowing the Central Bank to focus on other policy
instruments in the fight against inflation.