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The Usual Suspects? Productivity and Demand Shocks and Asia-Pacific Real Exchange Rates

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  • Chinn, Menzie D

Abstract

A productivity-based model of East Asian relative prices and real exchange rates is tested using calculated productivity levels for China, Indonesia, Japan, Korea, Malaysia, Philippines, Singapore, Taiwan, and Thailand. Time-series regressions of the exchange rate on relative productivity ratios indicate such a relationship for Japan, Malaysia, and the Philippines (and Indonesia and Korea when oil prices are included). Panel regression provides slightly more encouraging results when the panel encompasses a subset of countries (Indonesia, Japan, Korea, Malaysia, and the Philippines). Neither government spending nor the terms of trade appear to be important factors. Copyright 2000 by Blackwell Publishing Ltd.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Review of International Economics.

Volume (Year): 8 (2000)
Issue (Month): 1 (February)
Pages: 20-43

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Handle: RePEc:bla:reviec:v:8:y:2000:i:1:p:20-43

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  1. Canzoneri, Matthew B. & Cumby, Robert E. & Diba, Behzad, 1999. "Relative labor productivity and the real exchange rate in the long run: evidence for a panel of OECD countries," Journal of International Economics, Elsevier, vol. 47(2), pages 245-266, April.
  2. Jeffrey A. Frankel & Andrew K. Rose, 1995. "A Panel Project on Purchasing Power Parity: Mean Reversion Within and Between Countries," NBER Working Papers 5006, National Bureau of Economic Research, Inc.
  3. Phylaktis, Kate & Kassimatis, Yiannis, 1994. "Does the real exchange rate follow a random walk? The Pacific Basin perspective," Journal of International Money and Finance, Elsevier, vol. 13(4), pages 476-495, August.
  4. Strauss, Jack, 1996. "The cointegrating relationship between productivity, real exchange rates and purchasing power parity," Journal of Macroeconomics, Elsevier, vol. 18(2), pages 299-313.
  5. Louis Dorrance Johnston & Menzie David Chinn, 1997. "Real Exchange Rate Levels, Productivity and Demand Shocks: Evidence from a Panel of 14 Countries," IMF Working Papers 97/66, International Monetary Fund.
  6. Charles Engel, 1996. "Long-Run PPP May Not Hold After All," NBER Working Papers 5646, National Bureau of Economic Research, Inc.
  7. Charles Engel, 1995. "Accounting for U.S. Real Exchange Rate Changes," NBER Working Papers 5394, National Bureau of Economic Research, Inc.
  8. Bela Balassa, 1964. "The Purchasing-Power Parity Doctrine: A Reappraisal," Journal of Political Economy, University of Chicago Press, vol. 72, pages 584.
  9. Hsieh, David A., 1982. "The determination of the real exchange rate : The productivity approach," Journal of International Economics, Elsevier, vol. 12(3-4), pages 355-362, May.
  10. Jose De Gregorio & Holger C. Wolf, 1994. "Terms of Trade, Productivity, and the Real Exchange Rate," NBER Working Papers 4807, National Bureau of Economic Research, Inc.
  11. Takatoshi Ito & Peter Isard & Steven Symansky, 1999. "Economic Growth and Real Exchange Rate: An Overview of the Balassa-Samuelson Hypothesis in Asia," NBER Chapters, in: Changes in Exchange Rates in Rapidly Developing Countries: Theory, Practice, and Policy Issues (NBER-EASE volume 7), pages 109-132 National Bureau of Economic Research, Inc.
  12. Kakkar, Vikas & Ogaki, Masao, 1999. "Real exchange rates and nontradables: A relative price approach," Journal of Empirical Finance, Elsevier, vol. 6(2), pages 193-215, April.
  13. Marston, Richard C., 1990. "Systematic movements in real exchange rates in the G-5 : Evidence on the integration of internal and external markets," Journal of Banking & Finance, Elsevier, vol. 14(5), pages 1023-1044, November.
  14. Hsiu-Ling Wu, 1996. "Testing for the Fundamental Determinants of the Long-Run Real Exchange Rate: The Case of Taiwan," NBER Working Papers 5787, National Bureau of Economic Research, Inc.
  15. Young, Alwyn, 1995. "The Tyranny of Numbers: Confronting the Statistical Realities of the East Asian Growth Experience," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 641-80, August.
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