Purchasing power parity for fifteen Latin American countries: Stationary test with a Fourier function

This study applies a stationary test with a Fourier function, proposed by Becker et al. (2006), to test the validity of long-run purchasing power parity (PPP) in fifteen Latin American countries over the period of December 1994 to February 2010. The empirical results from the univariate unit root tests indicate that PPP does not hold for these fifteen countries under study. However, a stationary test with a Fourier function indicates that PPP is valid for four of these 15 Latin American countries and they are Brazil, Chile, Ecuador and Uruguay. These results have important policy implications for these fifteen Latin American countries under study.