Asymmetry dynamics in real exchange rates: new results on East Asian currencies

Citation

Baharumshah, Ahmad Zubaidi and Liew, Venus Khim Sen and Chowdhury, Ibrahim (2010) Asymmetry dynamics in real exchange rates: new results on East Asian currencies. International Review of Economics & Finance, 19 (4). pp. 648-661. ISSN 1059-0560; ESSN: 1873-8036

Abstract

This paper provides new evidence on the purchasing power parity (PPP) hypothesis in six East Asian countries. Based on nonlinear unit root tests, we discovered that the results are broadly consistent with the fact that real exchange rates (RERs) follow a nonlinear mean reversion process. We presented new evidence that the adjustment towards the PPP parity is asymmetric (LSTAR process) above and below the equilibrium value in all but one case — the Malaysian ringgit (MYR). The empirical results suggest that it is important that the conventional tests of PPP be amended to take account of asymmetries in the adjustment process in RERs.

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Additional Metadata

Item Type:	Article
Divisions:	Faculty of Economics and Management
DOI Number:	https://doi.org/10.1016/j.iref.2010.03.002
Publisher:	Elsevier
Keywords:	Real exchange rate; STAR; Nonlinear; Mean reversion; East Asian
Depositing User:	Nabilah Mustapa
Date Deposited:	16 May 2015 01:12
Last Modified:	12 Feb 2016 07:58
Altmetrics:	http://www.altmetric.com/details.php?domain=psasir.upm.edu.my&doi=10.1016/j.iref.2010.03.002
URI:	http://psasir.upm.edu.my/id/eprint/13320
Statistic Details:	View Download Statistic

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