TESTING FOR PURCHASING POWER PARITY FOR SELECTED CIS COUNTRIES

Year 2016, Volume: 8 Issue: 2, 84 - 93, 01.12.2016

Esra Ballı Çiler Sigeze

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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