The main aim of this paper is to test the absolute version of the purchasing power parity in Brazil, according to econometric procedures that allow the existence of structural breaks in the studied times series. Even controlling all the tests for structural breaks, including cointegration analysis with structural breaks, the estimated econometric models reject the validity of such theoretical approach, which states that the value of the domestic currency is completely determined by the price level differential.
Purchasing Power Parity; Exchange Rate; Structural Breaks; Price Level
