International parity relations between Poland and Germany: a cointegrated VAR approach

Agnieszka Stazka-Gawrysiak

MPRA Paper from University Library of Munich, Germany

Abstract: This paper analyses empirically the purchasing power parity, the uncovered interest parity and the real interest parity (Fisher parity) between Poland and Germany. The international parity relations are investigated jointly within the cointegrated VAR framework. Our analysis fails to find evidence that the parities, or any linear combinations of them, hold for our data set. We identify two long-run equilibrium relations: one imposing a long-run homogeneity restriction on the domestic (i.e. Polish) and foreign (i.e. German) inflation and the domestic interest rate and one that brings together the domestic real interest rate and the foreign inflation. Another interesting result is the weak exogeneity of the deviation of the real exchange rate from the PPP and the strong exogeneity of the German interest rate.

Keywords: cointegrated VAR; PPP; UIP; Fisher parity; Poland (search for similar items in EconPapers)
JEL-codes: E32 E43 F31 (search for similar items in EconPapers)
Date: 2008-03
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:24057

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