Business, Management and Accounting
4 years ago

Middle East Exchange Rates Linked to Long-Term Purchasing Power Parity Integration.

˜The œinternational journal of business and finance research
LONG-RUN PURCHASING POWER PARITY AND EXCHANGE RATES: EVIDENCE FROM THE MIDDLE EAST
Anwar Al-Gasaymeh, John Kasem

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The article examines if Purchasing Power Parity holds true in the long run for Jordan and its major trading partners in the Middle East. They used statistical tests to analyze data from 2005 to 2012. The results show that exchange rates and price levels are linked for four Gulf countries, while Oman and UAE are not. When there is a deviation from the equilibrium, exchange rates adjust to restore balance. Overall, the findings suggest that the Purchasing Power Parity model is valid in the long term and that Jordan's economy is connected with six trading nations in the region.