RE-EXAMINING PURCHASING POWER PARITY IN CROATIA: QUANTILE AUTOREGRESSION APPROACH

Mile Bošnjak, Vlatka Bilas and Ivan Novak
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Vlatka Bilas: Faculty of Economics and Business, University of Zagreb
Ivan Novak: Faculty of Economics and Business, University of Zagreb

Ekonomski pregled, 2020, vol. 71, issue 3, 203-214

Abstract: The paper aims to re-examine validity of purchasing power parity (PPP) theory in Croatia. Data sample consists of monthly data on real effective exchange rate of Croatian kuna. The paper employed several unit root tests with different specification and quantile autoregression approach. The results from unit root tests unambiguously indicate existence of unit root and persistence of real effective exchange rate of Croatian kuna while quantile autoregression model indicate asymmetries in endogenous shocks. Eventually, the research results do not support validity of PPP theory in case of Croatia.

Keywords: Purchasing power parity; Real effective exchange rate; Quantile autoregression; Croatia (search for similar items in EconPapers)
JEL-codes: C22 F31 F41 (search for similar items in EconPapers)
Date: 2020
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