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Testing Purchasing Power Parity for the New EU Members and Turkey : Panel Cointegration Analysis with Disaggregated CPI

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  • Hulya Saygili
  • Mesut Saygili

Abstract

This study applies multivariate panel cointegration technique to evaluate PPP hypothesis by using consumer price sub-indices of new EU member transition economies and Turkey. We aim not only to compare parameter estimates across the sectors of an economy but also across the economies at different EU transition stages. We find that failure to get evidence for cointegration to support PPP can be attributed to the inclusion of non-tradable goods in the aggregated data, as well as to the extent of trade relationship.

Suggested Citation

  • Hulya Saygili & Mesut Saygili, 2011. "Testing Purchasing Power Parity for the New EU Members and Turkey : Panel Cointegration Analysis with Disaggregated CPI," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 11(2), pages 49-69.
    • Handle: RePEc:tcb:cebare:v:11:y:2011:i:2:p:49-69
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    File URL: http://www.tcmb.gov.tr/wps/wcm/connect/EN/TCMB+EN/Main+Menu/Publications/Central+Bank+Review/2011/Volume+11-2/
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    References listed on IDEAS

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    5. Egert, Balazs & Drine, Imed & Lommatzsch, Kirsten & Rault, Christophe, 2003. "The Balassa-Samuelson effect in Central and Eastern Europe: myth or reality?," Journal of Comparative Economics, Elsevier, vol. 31(3), pages 552-572, September.
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    Cited by:

    1. Karsten Staehr, 2010. "Income convergence and inflation in Central and Eastern Europe : does the sun always rise in the East," Bank of Estonia Working Papers wp2010-04, Bank of Estonia, revised 22 Mar 2010.

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    More about this item

    Keywords

    Purchasing Power Parity; Panel cointegration; European Union; Transition economies; Turkey;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • F15 - International Economics - - Trade - - - Economic Integration
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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