The Validity of Purchasing Power Parity in Central and Eastern European Countries: A Rolling Nonlinear Unit Root Test

2012 ◽  
Vol 25 (4) ◽  
pp. 973-986 ◽  
Author(s):  
Veli Yilanci
Keyword(s):  
Purchasing Power Parity ◽  
Unit Root ◽  
Unit Root Test ◽  
European Countries ◽  
Purchasing Power ◽  
Eastern European ◽  
Power Parity ◽  
Eastern European Countries

Revisiting purchasing power parity in Eastern European countries: quantile unit root tests

2016 ◽  
Vol 52 (2) ◽  
pp. 463-483 ◽  
Author(s):  
Mohsen Bahmani-Oskooee ◽  
Tsangyao Chang ◽  
Tsung-Hsien Chen ◽  
Han-Wen Tzeng
Keyword(s):  
Purchasing Power Parity ◽  
Unit Root ◽  
European Countries ◽  
Unit Root Tests ◽  
Purchasing Power ◽  
Eastern European ◽  
Power Parity ◽  
Eastern European Countries

scholarly journals PERSISTENCE OF REAL EXCHANGE RATES IN THE CENTRAL AND EASTERN EUROPEAN COUNTRIES

2016 ◽  
Vol 17 (3) ◽  
pp. 381-396
Author(s):  
Ahmad Zubaidi BAHARUMSHAH ◽  
Siew-Voon SOON ◽  
Stilianos FOUNTAS ◽  
Nurul Sima MOHAMAD SHARIFF
Keyword(s):  
Exchange Rates ◽  
Confidence Intervals ◽  
Purchasing Power Parity ◽  
Structural Breaks ◽  
Real Exchange Rates ◽  
European Countries ◽  
Purchasing Power ◽  
Eastern European ◽  
Power Parity ◽  
Eastern European Countries

We investigate the mean reversion in real exchange rates for Central and Eastern European countries. We use point and confidence interval estimates from the Phillips et al.’s (2001) local-persistent model as our preferred measures of the persistence of real exchange rates. We find that the adjustment to purchasing power parity is more rapid after accounting for structural breaks, with half-life deviation from parity below 18 months, which is consistent with the explanation based on nominal rigidities. The estimated narrow confidence intervals for the half-lives invalidate the purchasing power parity puzzle for transition and some core European Union countries. The novelty of our results lies in the finding of strong evidence for purchasing power parity as the local-persistent model produces shorter half-lives and much narrower corresponding confidence intervals than those obtained by standard Dickey-Fuller and local-to-unity models. Our evidence for PPP suggests that the transition countries have maintained their long-run competitiveness against their trading partners.

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