This study applies a simple and powerful nonlinear threshold unit root test proposed by Caner and Hansen (2001 Caner, M. and Hansen, B. 2001. Threshold autoregression with a unit root. Econometrica, 69: 1555–96.
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) to test the validity of long-run Purchasing Power Parity (PPP) in a sample of nine East Asian countries. The empirical results indicate that PPP holds true for more than half of these nine East Asian countries under study, and the adjustment towards PPP is found to be nonlinear.