The Validity of Purchasing Power Parity Hypothesis in Middle East and Northern Africa Countries

by Kalyoncu, Hüseyin & Kula, Ferit & Aslan, Alper
Published in Romanian Journal of Economic Forecasting
, 2010, volume 13 issue 4, 125-131

 Requires a PDF viewer such as Xpdf or Adobe Acrobat Reader


This paper re-examines the Purchasing Power Parity (PPP) hypothesis in which the endogenously determined break points are incorporated in thirteen major Middle East and Northern Africa (MENA) countries by using official and black market exchange rates data over 1970-1998. We utilize Lagrange Multiplier (LM) unit root test that endogenously determines structural breaks in level and trend. We find evidence of PPP for all countries using official and/or black market real exchange rates at the 10% level or better.

Keywords: Purchasing Power Parity (PPP), Real exchange rate, Black market, Exchange rates, Unit-root test, Structural break
JEL Classification:
F31, C22, C23