PURCHASING POWER PARITY IN NINE TRANSITION COUNTRIES: PANEL SURKSS TEST

✍ Scribed by Tsangyao Chang; Han-Wen Tzeng

• Publisher: John Wiley and Sons
• Year: 2011
• Tongue: English
• Weight: 103 KB
• Volume: 18
• Category: Article
• ISSN: 1076-9307
• DOI: 10.1002/ijfe.457

✦ Synopsis

ABSTRACT

This study applies Panel Seemingly Unrelated Regressions Kapetanios et al. (SURKSS) tests, proposed by Wu and Lee (2009), to investigate the properties of long‐run purchasing power parity (PPP) in nine transition countries over the period of January 1995 to December 2008. The empirical results from the univariate unit‐root and panel‐based unit‐root tests indicate that PPP does not hold for these nine countries under study. However, Panel SURKSS tests indicate that PPP is valid for only two of these nine countries. As concerns major policy, our study implies that PPP can be used to determine the equilibrium exchange rate for both Estonia and Hungary, two countries under study. Our 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. Copyright © 2011 John Wiley & Sons, Ltd.