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Traded and nontraded productivity indicators are established for six countries belonging to the Organization for Economic Cooperation and Development. Johansen cointegration and hypotheses testing shows cointegration between local and foreign productivity differentials and real exchange rate. The rate exhibits a positive correlation with local productivity of traded products.

The association between the national price level (PL) and nontradables price (P) can be used to derive various purchasing power parity (PPP) indices. PPP is defined as an index of the prices of exportables, importables and nontraded goods. It was posited that a methodology using simultaneous equations computing for the relative prices of nontradables will result in a dependent variable which will provide an alternative econometric analysis of PL.

Fractional and Harris-Inder cointegration tests are employed to analyze the Purchasing Power Parity (PPP) between the US and four high inflation countries, namely Russia, Poland, Slovenia and Romania. Using only the Russian and Slovenian data, the findings show evidence of relative PPP and very little evidence of absolute PPP. Some support for relative PPP is observed among the four Eastern European countries. It is also observed that countries with large differences in price movements may show favorable evidence of PPP even during short periods of time.