Testing Purchasing Power Parity in Romania using standard unit root tests, with one structural break and cointegration analysis
In this paper we aim to analyze the long-run validity of the Purchasing Power Parity (PPP) hypothesis for the Romanian exchange rate. Our goal is achieved using Zivot-Andrews test with one structural break in order to identify changes in real exchange rate compared with traditional tests like Augmented Dickey-Fuller and Phillips-Perron and cointegration analysis in order to identify the long-run relationship between exchange rate and domestic and foreign prices. Real exchange rate stationarity implies that a shock it is absorbed in time and PPP holds in long-run. If nominal exchange rate and prince indices are non-stationary we verify if the variables are cointegrated as PPP weak form and symmetry and proportionality conditions as PPP strong form. We identify evidence of cointegration for all three models, but we don’t find any evidence to support symmetry and proportionality condition for PPP strong form case. Also, we use three different price indices: consumer price index, consumer price index without regulated prices and industrial producer price index in order to identify which indices is more relevant for our analysis. The monthly data cover the 2001M01-2011M09 period. The empirical analysis provided mixed results depending on the used price index and methodology.
Volume (Year): 15 (2012)
Issue (Month): 44 (June)
|Contact details of provider:|| Postal: |
Web page: http://www.rei.ase.ro/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:rej:journl:v:15:y:2012:i:44:p:225-242. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Radu Lupu)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.