Title: Investigating strong-form purchasing power parity for EUR/PLN within STVECM framework
Authors: Adrian Burda - Uniwersytet Ekonomiczny w Krakowie (Poland) [presenting]
Abstract: Existence of strong-form purchasing power (PPP), both for developed and emerging economies remains a widely investigated topics in international finance and macroeconomics. In case of Polish zloty, before the global financial crisis the existence strong-form PPP had been rejected in most studies, due to its appreciation against to main currencies. However, after 2008 more and more arguments supporting this hypothesis occured. The purpose is to verify strong-form purchasing power parity (PPP) of EUR/PLN within different variants of exponential smooth transition vector error correction model (ESTVECM) as well as first and second order logistic smooth transition vector error correction framework (LSTVECM and 2LSTVECM respectively). Significance of respective exponential and logistic smooth transition functions is compared with linear error-correction mechanism mechanism present in VECM. The competitive models for recursive samples are compared by likelihood ratio test, information criteria, out of sample forecast accuracy measures and by directional accuracy test.