The univariate and panel Lagrange Multiplier (LM) unit root tests with one and two structural breaks proposed by Lee and Strazicich (2003, 2004) which are considerably more powerful than traditional tests are employed to investigate whether the purchasing power parity (PPP) theory holds true for...

This paper is aim to test the validity of the purchasing power parity hypothesis by analyzing the transition economies such as Bulgaria, Czech Republic, Hungary, Poland, Romania. For this purpose, the minimum LM unit root test with one structural break is applied to real exchange rate data.