Purchasing Power Parity and Cointegration: Evidence from Latvia and Slovakia
Purchasing Power Parity and Cointegration: Evidence from Latvia and Slovakia
Author(s): Michaela ChocholatáSubject(s): Economy
Published by: Ekonomický ústav SAV a Prognostický ústav SAV
Keywords: exchange rates; harmonized index of consumer prices (HICP); purchasing power parity; cointegration; Engle-Granger method; Johansen method
Summary/Abstract: This paper deals with the analysis of the purchasing power parity between Lat-via and the euro area and between Slovakia and the euro area using the Engle-Granger and Johansen cointegration techniques. Latvia and Slovakia became members of the European Union in May 2004 and have been already the members of the Exchange Rate Mechanism II (ERM II) preparing for the euro adoption. The whole analysis was done on monthly data covering the period January 1999 – May 2008. Both the Engle-Granger and the Johansen method did not confirmed the purchasing power parity (PPP) validity in both analysed cases.
Journal: Ekonomický časopis
- Issue Year: 57/2009
- Issue No: 04
- Page Range: 344-358
- Page Count: 15
- Language: English