Abstract
The paper examines the theory of Purchasing Power Parity (PPP) hypothesis to determine whether the hypothesis is valid for Ghana for the period 1960 to 2013, by employing the Augmented Dickey-Fuller (ADF) test and the Kwiatkwski, Phillips, Schmidt and Shin (KPSS) test on a single time series data to test the unit root properties of the real exchange rate (Official exchange rate).It is found that the real exchangerate hasa unit root or are non-stationary in levels. The findings suggest that the purchasing power parity hypothesis is not valid for the period under discussion.
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