Abstract:

The purchasing power parity is calculated by the ratio of the national currency required to purchase a commodity or service basket.This study aims to make an analysis on the validity of the Purchasing Power Parity Theory in Azerbaijan using data set for months from 01.01.2000 to 31.12.2015 for several months. Therefore, the dataset is composed of variables such as Nominal Foreign Exchange Rate of the Azerbaijan country, Domestic Consumer Price Index.In this study, the concept of stationarity was emphasized between time series. In order to investigate whether the Purchasing Power Parity is valid in Azerbaijan, first the Unit Root Test, Cointegration Test and Error Correction Methods were explained. Then Descriptive Statistics and Correlation Coefficient were explained. Median, Mod, Variance, Standard Deviation from Descriptive Statistics for the validity of SAGP were analyzed with excel and it was investigated whether the Purchasing Power Parity is valid or not.AZN / $ "2000-2015" and TUFE / AZN "2000-2015" for the correlation coefficient and "2000-2015" for the correlation coefficient and Descriptive Statistics excel in the month of "2009-2014". Finally, for the analysis of the validity of the Purchasing Power Parity, the "Augemented Dickey Fuller Unit Root Test", "Johansen Cointegration Test", "Error Correction Model" and $ / AZN% Exchange "2000-2005", "2006-2014", "2015" TÜFE / AZN and TÜFE / AZN% Change was made monthly by Eviews program in the years 2000-2005, 2006-2014, and 2015, and their validity was investigated by comparison. As a result of the tests applied, long-term relationship was found between the series. The currencies are increasing, while the CPI is seen to be decreasing, and it is understood that the CPI is the original from the currencies.That is to say, in the examination conducted by the Cointegration (Cointegration) test, it is seen that the Purchasing Power Parity is valid in the said period.

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