Title

Purchasing Power Parity: Evidence From A Transition Economy

Keywords

Croatia; Productivity; Purchasing power parity; Transition

Abstract

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. © 2005 Society for Policy Modeling. Published by Elsevier Inc. All rights reserved.

Publication Date

9-1-2005

Publication Title

Journal of Policy Modeling

Volume

27

Issue

6

Number of Pages

665-672

Document Type

Article

Personal Identifier

scopus

DOI Link

https://doi.org/10.1016/j.jpolmod.2005.03.001

Socpus ID

23944468232 (Scopus)

Source API URL

https://api.elsevier.com/content/abstract/scopus_id/23944468232

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