Research Article

PURCHASING POWER PARITY IN NINE TRANSITION COUNTRIES: PANEL SURKSS TEST

  1. Tsangyao Chang1,*,
  2. Han-Wen Tzeng2

Article first published online: 30 DEC 2011

DOI: 10.1002/ijfe.457

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How to Cite

Chang, T. and Tzeng, H.-W. (2011), PURCHASING POWER PARITY IN NINE TRANSITION COUNTRIES: PANEL SURKSS TEST. Int. J. Fin. Econ.. doi: 10.1002/ijfe.457

Author Information

  1. 1

    Feng Chia University - Finance, Taichung, Taiwan

  2. 2

    Overseas Chinese University - Finance, Taichung, Taiwan

*Tsangyao Chang, Feng Chia University - Finance, No. 100, Wenhua Road, Seatwen, Taichung 40724, Taiwan.
E-mail: tychang@fcu.edu.tw

Publication History

  1. Article first published online: 30 DEC 2011
  2. Manuscript Accepted: 1 AUG 2011
  3. Manuscript Received: 9 JUN 2010

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Keywords:

  • Purchasing power parity;
  • Panel SURKSS test;
  • transition countries

ABSTRACT

This study applies Panel Seemingly Unrelated Regressions Kapetanios et al. (SURKSS) tests, proposed by Wu and Lee (2009), to investigate the properties of long-run purchasing power parity (PPP) in nine transition countries over the period of January 1995 to December 2008. The empirical results from the univariate unit-root and panel-based unit-root tests indicate that PPP does not hold for these nine countries under study. However, Panel SURKSS tests indicate that PPP is valid for only two of these nine countries. As concerns major policy, our study implies that PPP can be used to determine the equilibrium exchange rate for both Estonia and Hungary, two countries under study. Our results emphasized that there is weak evidence about the long-run PPP hypothesis in transition countries, and the validity of PPP remains a controversial and unsettled issue. Copyright © 2011 John Wiley & Sons, Ltd.

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