Original scientific paper
PURCHASING POWER PARITY IN MENA REVISITED: EMPIRICAL EVIDENCE IN THE PRESENCE OF ENDOGENOUSLY DETERMINED BREAK POINTS
Ferit Kula
Alper Aslan
Mete Feridun
Abstract
This paper re-examines the Purchasing Power Parity hypothesis in which the endogenously
determined break points are incorporated in 13 major MENA countries by using official and black
market exchange rates data over 1970-1998. We utilize Lagrange Multiplier unit root test that
endogenously determines structural breaks in level. We find evidence of PPP for eight of the thirteen
countries at the 10% level or better. We also construct the half lives to investigate the persistence of
deviations from PPP. The point estimates of the half lives for both OREX and BMREX in the seven
countries are lower than range of the consensus of 3-5 years in the literature.1
Keywords
PPP; Black Market Exchange Rates
Hrčak ID:
67734
URI
Publication date:
1.3.2011.
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