ERC-ODTÜ Uluslararası Ekonomi Kongresi-III, Ankara, Turkey, 8 - 11 September 1999, pp.1-22
This paper investigates several important parities in international finance, including both the
absolute and the relative versions of PPP and UCIP. Redefining these parities as transitory
deviations from the long-run or steady state equilibrium conditions, I test the validity of these
hypotheses by investigating the existence of unit roots in data from a panel of OECD countries.
The findings support that all these parities hold in the long run, although adjustment might be
slow.
JEL Classification: C22; C23; F31
Key words: PPP; UCIP; Panel Data; Unit Root