Open Conference Systems, ICQQMEAS2009

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THE VALIDITY OF PPP IN THE DAIRY SECTOR AND THE ROLE OF MACROECONOMIC VARIABLES: CASE OF GREECE
E. Zafeiriou

Last modified: 2015-09-18

Abstract


The present paper investigates the validity of PPP (Taylor and Taylor, 2004; Zafeiriou et al, 2006) and the role of the macroeconomic variables in the formation of prices in dairy products in the Greek market. The macroeconomic variables used in the present paper are the differences between the inflation rates of Greece and U.S.A., as well as the differences in the short – term interest rates between the two countries. In addition we employed another variable representing the openness of the dairy market in Greece, while the role of CAP was examined with the use of a dummy variable. In the first step we surveyed the validity of PPP for the case of Greece and then we examined the role of the macroeconomic variables in the validity or to the non validity of PPP for the commodity price index studied. The method applied for the study of the long – run relationship is the Johansen cointegration technique (1988, 1991). According to the results of our survey, one and sole relationship was validated, between the real exchange rates and the macroeconomic variables used. This result implies that in the long run there is a relationship among these variables, while only the real exchange rates and the interest rates difference affect the inflation rates differential in the long run as confirmed with the estimation of VECM

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