An empirical test of the purchasing power parity for transition economies: Panel SURADF tests

Purchasing Power Parity (PPP) for transition economies is tested using Panel Seemingly Unrelated Regressions Augmented Dickey-Fuller (SURADF) tests of Breuer et al. (2001) for the period of January 1995 to December 2008. Although the other panel-based unit-root tests are joint tests of a unit root for all members of the panel and are incapable of determining the mix of I(0) and I(1) series in the panel setting, the Panel SURADF tests test a separate unit-root null hypothesis for each individual panel member and therefore identify how many and which series in the panel are stationary processes. The PPP hypothesis is not confirmed for all the nine transition countries except Estonia and Romania when Breuer et al.'s Panel SURADF tests are conducted.