THE RELATIONSHIP BETWEEN CONSUMER PRICE INDEX AND PURCHASING POWER PARITY: A CASE OF MIST

The Consumer Price Index (CPI) is widely used to measure price changes in goods and services consumed by individuals and the change in annual inflation value. CPI plays a primary role in the conception of monetary policy and in the implementation of socio-economic regulations. The Purchasing Power Parity (PPP) is used for the purchase of products, which removes price differences. PPP is important in terms of comparing national income and price differences. The existence of some differences and similarities in terms of methodology and content between CPI and PPP reveal a debate as to whether there is a relationship between variables. The main purpose of this study is to investigate the relationship between the CPI and the PPP and to contribute to this debate has just been established. The relationship between the Consumer Price Index and the Purchasing Power Parity has been analyzed the period from 1990 to 2016 and the data obtained from World Bank and IMF statistics for MIST countries. In the analysis, the CIPS unit root test, Pedroni Cointegration test and the Westerlund Cointegration test were used. The long-run relationship among the variables was predicted by the cointegration tests and then parameters were estimated by FMOLS and DOLS tests. As a result of these tests, there is a long-time and positive relationship between the variables