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Purchasing Power Parity in Transition Economies: Does It Hold in the Czech Republic, Hungary and Slovenia?

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  • Jani Bekő
  • Darja Borsic
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    Abstract

    This article assesses the theory of purchasing power parity for the Czech Republic, Hungary and Slovenia in comparison with Austria, Germany, France and Italy, employing data from January 1992 to December 2006. The unit root tests applied fail to prove stationarity of the real exchange rate series. Although cointegration was found among nominal exchange rates and selected consumer price indices, the theory of purchasing power parity could not be confirmed for any of the three advanced transition countries. Following the literature on price movements and macroeconomic policies in transition economies, we list some arguments that substantiate our findings.

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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal Post-Communist Economies.

    Volume (Year): 19 (2007)
    Issue (Month): 4 ()
    Pages: 417-432

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    Handle: RePEc:taf:pocoec:v:19:y:2007:i:4:p:417-432

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    Cited by:
    1. Yutaka Kurihara, 2009. "Is Purchasing Power Parity Hypothesis Reasonable from the View of Trade Blocks and Currency Zones?," European Research Studies Journal, European Research Studies Journal, vol. 0(3), pages 3-14.
    2. Chang, Tsangyao & Tzeng, Han-Wen, 2011. "Long-run purchasing power parity with asymmetric adjustment: Further evidence from nine transition countries," Economic Modelling, Elsevier, vol. 28(3), pages 1383-1391, May.
    3. Zorica Mladenović & Kosta Josifidis & Slađana Srdić, 2013. "The Purchasing Power Parity in Emerging Europe: Empirical Results Based on Two-Break Analysis," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 60(2), pages 179-202, April.
    4. repec:ebl:ecbull:v:6:y:2008:i:32:p:1-8 is not listed on IDEAS
    5. Stavarek, Daniel, 2010. "Determinants of the exchange market pressure in the euro-candidate countries," MPRA Paper 26933, University Library of Munich, Germany.
    6. Stazka, Agnieszka, 2008. "International parity relations between Poland and Germany: a cointegrated VAR approach," MPRA Paper 24057, University Library of Munich, Germany.
    7. He, Huizhen & Ranjbar, Omid & Chang, Tsangyao, 2013. "Purchasing power parity in transition countries: Old wine with new bottle," Japan and the World Economy, Elsevier, vol. 28(C), pages 24-32.
    8. He, Huizhen & Chang, Tsangyao, 2013. "Purchasing power parity in transition countries: Sequential panel selection method," Economic Modelling, Elsevier, vol. 35(C), pages 604-609.

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