Original scientific paper
RE-EXAMINATION OF THE PURCHASING POWER PARITY IN CENTRAL AND EASTERN EUROPEAN ECONOMIES
Ahmad Zubaidi Baharumshah
; Faculty of Economics and Management, Universiti Putra Malaysia, Selangor Darul Ehsan, Malaysia
Jani Bekő
; Faculty of Economics and Business, University of Maribor, Maribor, Slovenia
Darja Boršič
; Faculty of Economics and Business, University of Maribor, Maribor, Slovenia
Abstract
The empirical record on PPP tests for transition economies is far from being so opulent as it is for the developed market economies. This paper attempts to fill this gap by scrutinizing the theory of PPP on a
sample of Central and Eastern European economies. The paper has two main advances with respect to previous PPP studies. First, it employs a monthly data base on real exchange rates for a panel of 12 Central
and Eastern European economies by testing the theory separately with respect to US dollar and with respect to Euro. Second, we utilise a panel unit root test that involves the estimation of the ADF regression in a SUR framework. Since our study found support for the validity of PPP in some reforming European economies, special attention should be devoted to individual country-specific factors that cause PPP deviations.
Keywords
purchasing power parity; real exchange rates; stationarity test
Hrčak ID:
96662
URI
Publication date:
28.2.2011.
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