TESTING PURCHASING POWER PARITY HYPOTHESIS FOR TURKISH ECONOMY

Year 1998, Volume: 16 Issue: 1-2, 121 - 128, 31.12.1998

Galip Altınay

Abstract

The
aim of this study is to test purchasing power parity hypothesis empirically by
using cointegration method. For this \eason, monthly data for six major
countries' exchange rates and price levels that cover the period between
1982-1997 are employed. This period represents the managed  floating exchange rate regime, and since 1989
relatively more floatin ^o exchange rate regime. The cointegration
test results indicate that PPP does not hold for the period between 1982-1997.
Nevertheless, tar the period between 1989-1997 we found a weak cointegrating between the two out of six pairs of series,
These pairs of series are Italian Lira relative price and British Pound
relative price series.

Keywords

Purchasing power parity hypothesis, unit root tests, cointegration

References

• Ahking F.W. (1990), "Further Results on Long-Run Purchasing Power Parity in the 1920s", European Economic Review, vol.-34, pp.913- 919.