Purchasing power parity in high-inflation eastern European countries: Evidence from fractional and Harris-Inder cointegration tests

This paper investigates the Purchasing Power Parity (PPP) between the United States and four high inflation Eastern European countries using fractional and Harris-Inder cointegration test methods. The four countries are poland, Romania, Russia and Slovenia. The results provide evidence of(relative) PPP using only the Russian and the Slovenian data, and very little evidence of strict (absolute) PPP is also found. Some support for relative PPP is also found among the four European countries. Results in this paper show that countries with large differences in the price levels may show support for PPP even during short periods of time.