Analysis of Purchasing Power Parity with Data for Macedonia
UACS Annual Review of Trade 2011, ISBN 978‐608‐4607‐08‐3
17 Pages Posted: 1 Jul 2011 Last revised: 9 Jul 2012
Date Written: June 29, 2011
This paper examines PPP parity theory with data for Macedonia. We test the empirical consensus in this literature that real exchange rates tend towards PPP in the very long run, also we use co-integration Engle-Granger method and error correction mechanism. The hypothesis we test that PPP theory holds in long run in the case of Macedonia, and this hypothesis is proven to be true.
Keywords: PPP, Exchange Rate, Co-Integration, Unit Root, Stationarity
JEL Classification: E0
Suggested Citation: Suggested Citation