Purchasing Power Parity By sectors From Selected European Countries: Cointegration and Structural Breaks

In this paper we study the long-run Purchasing Power Parity (PPP) hypothesis by traded and non-traded sectors using cointegration techniques in the presence of structural breaks, for a set of European countries during the period 1975:1-1995:12. This approach is complementary to many existing approaches to investigate the PPP Hypothesis. We find evidence in favor of long-run PPP hypothesis when commodity prices and used in the presence of structural breaks. This result lends support to the integration process in the European Union. [C22, F30]