Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/168691
Authors: 
Acaravci, Ali
Ozturk, Ilhan
Year of Publication: 
2010
Citation: 
[Journal:] Amfiteatru Economic Journal [ISSN:] 2247-9104 [Volume:] 12 [Year:] 2010 [Issue:] 27 [Pages:] 190-198
Abstract: 
This study examines the validity of the purchasing power parity (PPP) in 8 transition countries for monthly data from 1992:1 to 2009:1. While results from both the ADF unit root and the KPSS unit root test indicate that PPP does not hold for Bulgaria, Croatia, Czech Republic, Hungary, Macedonia (FYR), Poland, Romania and Slovak Republic. In the presence of structural breaks, PPP holds only for Bulgaria and Romania it does not hold for the other 6 transition countries. Testing the stationarity of real exchange rate series by using four types of unit roots tests, the evidence suggests that real effective exchange rate is nonstationary and thus PPP doesn’t hold for all 6 transition countries in the long run. All results emphasized that there is weak evidence about the long-run PPP hypothesis in transition countries and the validity of PPP remains a controversial and unsettled issue.
Subjects: 
real exchange rate
unit root tests
structural breaks
transition countries
JEL: 
C22
E31
F31
Creative Commons License: 
http://creativecommons.org/licenses/by/4.0/
Document Type: 
Article

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