Purchasing Power Parity (PPP) has been regarded as the most important theory to explain the exchange rate movement based on relative price levels of two countries. After 1973, more and more countries were taking the floating exchange rate system, and the real exchange is testing out to be a non-stationary time seriess. This would be some real factors to have an effect on the real exchange rate. In the article, We study how these possible factors change the real exchange rate and make use of Wu et.al (2008) and Lee (2010)¡¦s local projection to estimate the impulse responses under the non-stationary time series which has cointegration vectors, and then we compare the difference between the impulse response in conventional VAR and the impulse response in Local Projection. The emprical model we use is the smae one as in Zhou (1995) and Wang and Dunne (2003), and the rule of the data is the same as in Wang and Dunne (2003). Finally, we get the consistent conclusion with Wu et.al (2008), Zhou (1995) and Wang and Dunne (2003).

This thesis estimates the quarterly electricity demand of Turkey. First of all proper seasonal time series model are found for the variables: electricity demand, temperature, gross domestic product and electricity price. After the right seasonal time series model are found Hylleberg, Engle, Granger and Yoo (1990) test is applied to each variable. The results of the test show that seasonal unit roots exist for the electricity price even it cannot be seen at the graph. The other variables have no seasonal unit roots when the proper seasonal time series model is chosen. Later, the cointegration is tested by looking at the vector autoregressive model. As the cointegration is seen vector error correction model is found. There is long-run equilibrium when the price is the dependent variable and independent variable is gross domestic product. Temperature is taken as exogenous variable and demand is not statistically significant.