Asymmetry dynamics in real exchange rates: new results on East Asian currencies
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 presente...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
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Elsevier
2010
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| Online Access: | http://psasir.upm.edu.my/id/eprint/13320/ http://psasir.upm.edu.my/id/eprint/13320/1/Asymmetry%20dynamics%20in%20real%20exchange%20rates.pdf |
| _version_ | 1848842080765345792 |
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| author | Baharumshah, Ahmad Zubaidi Liew, Venus Khim Sen Chowdhury, Ibrahim |
| author_facet | Baharumshah, Ahmad Zubaidi Liew, Venus Khim Sen Chowdhury, Ibrahim |
| author_sort | Baharumshah, Ahmad Zubaidi |
| building | UPM Institutional Repository |
| collection | Online Access |
| description | 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. |
| first_indexed | 2025-11-15T07:53:27Z |
| format | Article |
| id | upm-13320 |
| institution | Universiti Putra Malaysia |
| institution_category | Local University |
| language | English |
| last_indexed | 2025-11-15T07:53:27Z |
| publishDate | 2010 |
| publisher | Elsevier |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | upm-133202016-02-12T07:58:32Z http://psasir.upm.edu.my/id/eprint/13320/ Asymmetry dynamics in real exchange rates: new results on East Asian currencies Baharumshah, Ahmad Zubaidi Liew, Venus Khim Sen Chowdhury, Ibrahim 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. Elsevier 2010-10 Article PeerReviewed application/pdf en http://psasir.upm.edu.my/id/eprint/13320/1/Asymmetry%20dynamics%20in%20real%20exchange%20rates.pdf 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 10.1016/j.iref.2010.03.002 |
| spellingShingle | Baharumshah, Ahmad Zubaidi Liew, Venus Khim Sen Chowdhury, Ibrahim Asymmetry dynamics in real exchange rates: new results on East Asian currencies |
| title | Asymmetry dynamics in real exchange rates: new results on East Asian currencies |
| title_full | Asymmetry dynamics in real exchange rates: new results on East Asian currencies |
| title_fullStr | Asymmetry dynamics in real exchange rates: new results on East Asian currencies |
| title_full_unstemmed | Asymmetry dynamics in real exchange rates: new results on East Asian currencies |
| title_short | Asymmetry dynamics in real exchange rates: new results on East Asian currencies |
| title_sort | asymmetry dynamics in real exchange rates: new results on east asian currencies |
| url | http://psasir.upm.edu.my/id/eprint/13320/ http://psasir.upm.edu.my/id/eprint/13320/ http://psasir.upm.edu.my/id/eprint/13320/1/Asymmetry%20dynamics%20in%20real%20exchange%20rates.pdf |