Testing For Purchasing Power Parity In A Panel Of Middle-Eastern Countries

Abstract

The attention given to testing for purchasing power parity (PPP) using middle-eastern data has so far been very limited. This paper tests for PPP in a panel of twelve countries from the Middle East. Four different unit root procedures are used to test for the mean reversion property in the real exchange rates of these countries. The evidence in support of PPP in the tested panel is generally found to be weak.