Purchasing Power Parity in the Nordic Countries

Abstract

This paper tests for purchasing power parity (PPP) between four Nordic coun- tries and the Eurozone using monthly observations from 2000 to 2014. The study employes the Johansen test for cointegration. Johansen method indicates the absence of cointegration for all countries except Sweden and further shows the existence of one cointegration vector. Thus, this study confirms the validity of PPP in the long-run for Sweden only.