The Law of One Price in Six Central and Eastern European Economies

Ilir Miteza

Comparative Economic Studies, 2012, vol. 54, issue 3, 596 pages

Abstract: This study examines the validity of the purchasing power parity (PPP) for six Central and East European countries (CEEC) during the 1991–2010 period. Because this rather short-time period is usually not sufficient to produce reliable findings using conventional univariate unit root tests, I use the covariate point optimal test (CPT) developed by Elliott and Jansson, which enhances the power of the test by exploiting information in stationary covariates. CPT tests provide support for the PPP hypothesis in four out of the six CEEC economies. Evidence of PPP is especially strong in the Czech Republic, Poland and Slovak Republic.

Date: 2012
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