publication . Article . 2013

The long and short run forcing variables of purchasing power parity of ASEAN-5

Abdalrahman AbuDalu; Elsadig Musa Ahmed;
Open Access
  • Published: 01 Jan 2013
Abstract
This study examines the long-run and short-run forcing variables of purchasing power parity (PPP) for ASEAN-5 currencies vis-a-vis the U.S. dollar, i.e., their real effective exchange rate (REER). This study uses the autoregressive distributed lag (ARDL) approach to co-integration over the period 1991:Q1 – 2006:Q2. Our empirical results suggest that the domestic money supply (M1) is a significant long run forcing variable for the REERs of Malaysia, Indonesia, the Philippines, and Singapore. However, the results suggest that the foreign interest rate (R*) is a long run forcing variable for Thailand’s REER. The findings can derive policy implication for the moneta...
Subjects
free text keywords: Purchasing Power Parity (PPP), Real Effective Exchange Rate (REER), ASEAN-5, ARD.
Related Organizations
48 references, page 1 of 4

Ahmad Z, Ping L (2004). On Singapore Dollar-U.S. Dollar and Purchasing Power Parity, The Singapore Econ. Rev. 49: 71- 84.

Baharumshah Z, Mohd A (1997). Purchasing Power Parity in South East Asian Countries: A Cointegration Approach, Asian Econ. J. 11: 141-154.

Baillie R, McMahon P (1990). The Foreign Exchange Market: Theory and Econometric Evidence. Cambridge Univ.

Bahmani-Oskooee M, Ng RCW (2002). Long-Run Demand for Money In Hong Kong: An Application of the ARDL Model. Intl. J. Bus. Econ., 1(2): 147-155. [OpenAIRE]

Bjorland HC, Hungness H (2002). Fundamental Determinants of the Long-Run Real Exchange Rate: The Case of Norway, Memorandum, Department of Economics, Oslo, University of Oslo, pp. 1-36.

Brissimis SN, Sideris DA, Vaumvaki FK (2005). Testing Long- Run Purchasing Power Parity Under Exchange Rate Targeting, J. IMF. 24: 909-981.

Cavallo M, Ghironi F (2002). Net foreign Assets and the Exchange Rate, J. Monetary Econ. 49: 1057-1097.

Chaboud AP, Jonathan HW (2005). Uncovered Interest Parity: It Works, But Not For Long, J. Intl. Econ., 66: 349- 362.

Cheung YW, Chinn MD, Pascual AG (2004). Empirical Exchange Rate Models Of Nineties: Are Any Fit to Survive? IMF WP/04/73, April.

Che A, Abul MM (2006). Purchasing Power Party (PPP) of ASEAN Economies, Using “Augmented” Long-run Structural Model Cointegration. A Paper Presented at Hawaii International Conference on Business, 25-28May 2006.

Chinn MD, Richard AM (1995). Banking on Currency Forecasts: How Predictable is Change in Money? J. Intl. Econ. 38: 161-78.

Clerk P, Macdnald R (1999). Exchange Rates and Economics Fundamentals: A Methodological Comparison of BEERS and FEERS, IN Equilibrium Exchange Rates, Ed. By Stein, J. and Macdonald R, Kluwer, Boston, Massachusetts, pp.285-322.

Caporalea G, Maria SK, Nikitas P (2001). Testing for PPP and UIP in an FIML Framework Some Evidence for Germany and Japan, Journal Pol. Model. 23: 637-650.

Dibooglu S, Walter E (1995). Multiple Cointegrating Vectors and Structural Economic Model: An Application to the French Franc I U.S. Dollar Exchange Rate, Southern Econ. J. 61: 1098-116.

Dornbuch R (1979). Monetary Policy Under Exchange Rate Flexibility, in Managed Exchange-Rate Flexibility: The Recent Experience, Federal Reserve Bank of Boston Conteaence Series, No. 20.

48 references, page 1 of 4
Abstract
This study examines the long-run and short-run forcing variables of purchasing power parity (PPP) for ASEAN-5 currencies vis-a-vis the U.S. dollar, i.e., their real effective exchange rate (REER). This study uses the autoregressive distributed lag (ARDL) approach to co-integration over the period 1991:Q1 – 2006:Q2. Our empirical results suggest that the domestic money supply (M1) is a significant long run forcing variable for the REERs of Malaysia, Indonesia, the Philippines, and Singapore. However, the results suggest that the foreign interest rate (R*) is a long run forcing variable for Thailand’s REER. The findings can derive policy implication for the moneta...
Subjects
free text keywords: Purchasing Power Parity (PPP), Real Effective Exchange Rate (REER), ASEAN-5, ARD.
Related Organizations
48 references, page 1 of 4

Ahmad Z, Ping L (2004). On Singapore Dollar-U.S. Dollar and Purchasing Power Parity, The Singapore Econ. Rev. 49: 71- 84.

Baharumshah Z, Mohd A (1997). Purchasing Power Parity in South East Asian Countries: A Cointegration Approach, Asian Econ. J. 11: 141-154.

Baillie R, McMahon P (1990). The Foreign Exchange Market: Theory and Econometric Evidence. Cambridge Univ.

Bahmani-Oskooee M, Ng RCW (2002). Long-Run Demand for Money In Hong Kong: An Application of the ARDL Model. Intl. J. Bus. Econ., 1(2): 147-155. [OpenAIRE]

Bjorland HC, Hungness H (2002). Fundamental Determinants of the Long-Run Real Exchange Rate: The Case of Norway, Memorandum, Department of Economics, Oslo, University of Oslo, pp. 1-36.

Brissimis SN, Sideris DA, Vaumvaki FK (2005). Testing Long- Run Purchasing Power Parity Under Exchange Rate Targeting, J. IMF. 24: 909-981.

Cavallo M, Ghironi F (2002). Net foreign Assets and the Exchange Rate, J. Monetary Econ. 49: 1057-1097.

Chaboud AP, Jonathan HW (2005). Uncovered Interest Parity: It Works, But Not For Long, J. Intl. Econ., 66: 349- 362.

Cheung YW, Chinn MD, Pascual AG (2004). Empirical Exchange Rate Models Of Nineties: Are Any Fit to Survive? IMF WP/04/73, April.

Che A, Abul MM (2006). Purchasing Power Party (PPP) of ASEAN Economies, Using “Augmented” Long-run Structural Model Cointegration. A Paper Presented at Hawaii International Conference on Business, 25-28May 2006.

Chinn MD, Richard AM (1995). Banking on Currency Forecasts: How Predictable is Change in Money? J. Intl. Econ. 38: 161-78.

Clerk P, Macdnald R (1999). Exchange Rates and Economics Fundamentals: A Methodological Comparison of BEERS and FEERS, IN Equilibrium Exchange Rates, Ed. By Stein, J. and Macdonald R, Kluwer, Boston, Massachusetts, pp.285-322.

Caporalea G, Maria SK, Nikitas P (2001). Testing for PPP and UIP in an FIML Framework Some Evidence for Germany and Japan, Journal Pol. Model. 23: 637-650.

Dibooglu S, Walter E (1995). Multiple Cointegrating Vectors and Structural Economic Model: An Application to the French Franc I U.S. Dollar Exchange Rate, Southern Econ. J. 61: 1098-116.

Dornbuch R (1979). Monetary Policy Under Exchange Rate Flexibility, in Managed Exchange-Rate Flexibility: The Recent Experience, Federal Reserve Bank of Boston Conteaence Series, No. 20.

48 references, page 1 of 4
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