Abstract
This study applies a simple and powerful nonlinear unit root proposed by Sollis (Citation2009) to test the validity of long-run Purchasing Power Parity (PPP) in G-7 countries over the period January 1980 to September 2008. The empirical results indicate that PPP holds true for all G-7 countries, with the exception of Canada, and the adjustment towards PPP is nonlinear but in a symmetric way. These results have important policy implications for the G-7 countries under study.
Notes
1 For detailed discussion see Sollis (Citation2009, p. 121).