TESTING FOR PURCHASING POWER PARITY FOR SELECTED CIS COUNTRIES

Abstract

This study examines the validity of PPP for Commonwealth of Independent States (CIS) namely Armenia, Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Russia and Ukraine for the period 1995M1-2015M11. In this study we perform stationary test on two bases. In the first place, we initiate conventional unit root test such as ADF. Secondly, we utilize unit root tests allowing for structural break. Given the span and characteristics of the period which involves a significant break such as 1998 Russian economic crisis, we conclude that PPP holds for Armenia, Belarus, Kazakhstan and Kyrgyzstan, while it does not hold for Azerbaijan, Russia and Ukraine.

Keywords

• Purchasing Power Parity, Real Exchange Rate, Transition Economies

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