EMPIRICAL VERIFICATION OF THE VALIDITY OF THE PURCHASING POWER PARITY THEORY BETWEEN MOROCCO AND THE EUROPEAN UNION

Abstract

This article attempts to test the existence of purchasing power parity between Morocco and the European Union. To do this, we have used two types of tests to confirm this hypothesis. The methodology used is based on a set of empirical studies, including Johansen cointegration tests and unit root tests.

The results of our study show that the unit root test rejects the hypothesis of the existence of purchasing power parity between Morocco and the European Union. However, for the cointegration test, the criteria for selecting the number of lags influenced the results. If the choice of the number of delays is based on the AIC and BIC information criteria, the validity of the purchasing power parity is rejected. On the other hand, if the choice of the number of delays is based on the HQ criterion, purchasing power parity is validated, which contradicts the conclusion of the first approach.