Purchasing power parity: Evidence from a transition economy
Abbreviated Journal Title
J. Policy Model.
purchasing power parity; Croatia; transition; productivity; UNIT-ROOT HYPOTHESIS; OIL-PRICE SHOCK; GREAT CRASH; EXCHANGE-RATES; BREAKS; TESTS; Economics
Whether the purchasing power parity (PPP) theory of exchange rate determination holds for transition economies is an interesting question, given peculiar situations of transition economies. In this paper, we examine the real exchange rate for Croatia, a transition economy that has had some success in moving towards a market economy. Using a battery of tests that allow for a maximum of two structural breaks whose locations are determined endogenously from the data, we failed to find evidence supporting the validity of PPP for the Croatian economy. Thus, the conjecture that transition economies experiencing growth in productivity and real wages should experience real appreciation (thereby introducing doubt as to whether purchasing power parity holds) is substantiated by our results. (c) 2005 Society for Policy Modeling. Published by Elsevier Inc. All rights reserved.
Journal of Policy Modeling
"Purchasing power parity: Evidence from a transition economy" (2005). Faculty Bibliography 2000s. 5537.