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Linear and nonlinear monetary approaches to the exchange rate of the Philippines peso-Japanese yen

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  • Venus khim-sen Liew

    ()
    (University Malaysia Sarawak)

Abstract

This study provides evidence of nonlinear long-run relationship between peso-yen exchange rate and its monetary determinants implied by the reduced-form flexible-price monetary model for the Philippines, using Breitung`s (2001) nonlinear cointegration testing procedures. The existence of such relationship is probably resulted from the strong and consistent bilateral trade relationship between the Philippines and Japan. Results from various monetary restrictions tests suggest that other forms of the related monetary model are not suitable in the determination of the peso-yen exchange rate.

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File URL: http://www.accessecon.com/Pubs/EB/2009/Volume29/EB-09-V29-I2-P76.pdf
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Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 29 (2009)
Issue (Month): 2 ()
Pages: 1320-1329

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Handle: RePEc:ebl:ecbull:eb-09-00146

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Keywords: monetary model; exchange rate; Philippines; cointegration; nonlinear; nonparametric; peso;

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References

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  1. repec:ebl:ecbull:v:3:y:2004:i:33:p:1-9 is not listed on IDEAS
  2. Liew, Venus Khim-Sen & Lee, Hock-Ann & Lim, Kian-Ping, 2005. "Purchasing power parity in Asian economies: further evidence from rank tests for cointegration," MPRA Paper 15530, University Library of Munich, Germany.
  3. Johansen, Soren, 1992. "Determination of Cointegration Rank in the Presence of a Linear Trend," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, Department of Economics, University of Oxford, vol. 54(3), pages 383-97, August.
  4. Breitung, Jorg, 2001. "Rank Tests for Nonlinear Cointegration," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 19(3), pages 331-40, July.
  5. Stock, James H & Watson, Mark W, 1993. "A Simple Estimator of Cointegrating Vectors in Higher Order Integrated Systems," Econometrica, Econometric Society, Econometric Society, vol. 61(4), pages 783-820, July.
  6. repec:ebl:ecbull:v:6:y:2008:i:31:p:1-13 is not listed on IDEAS
  7. Liew, Venus Khim-Sen & Chia, Ricky Chee-Jiun & Ling, Tai-Hu, 2009. "Long-run validity of purchasing power parity and rank tests for cointegration for Central Asian Countries," MPRA Paper 15794, University Library of Munich, Germany.
  8. Kwiatkowski, Denis & Phillips, Peter C. B. & Schmidt, Peter & Shin, Yongcheol, 1992. "Testing the null hypothesis of stationarity against the alternative of a unit root : How sure are we that economic time series have a unit root?," Journal of Econometrics, Elsevier, Elsevier, vol. 54(1-3), pages 159-178.
  9. Cheung, Yin-Wong & Lai, Kon S, 1993. "A Fractional Cointegration Analysis of Purchasing Power Parity," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 11(1), pages 103-12, January.
  10. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
  11. Sovannroeun SAMRETH & Dara LONG, 2008. "The Monetary Model of Exchange Rate: Evidence from the Philippines Using ARDL Approach," Economics Bulletin, AccessEcon, vol. 6(31), pages 1-13.
  12. Ronald Macdonald & Mark P. Taylor, 1993. "The Monetary Approach to the Exchange Rate: Rational Expectations, Long-Run Equilibrium, and Forecasting," IMF Staff Papers, Palgrave Macmillan, vol. 40(1), pages 89-107, March.
  13. Tatsuyoshi Miyakoshi, 2000. "The monetary approach to the exchange rate: empirical observations from Korea," Applied Economics Letters, Taylor & Francis Journals, Taylor & Francis Journals, vol. 7(12), pages 791-794.
  14. Swarna Dutt & Dipak Ghosh, 2000. "An empirical note on the monetary exchange rate model," Applied Economics Letters, Taylor & Francis Journals, Taylor & Francis Journals, vol. 7(10), pages 669-671.
  15. Rapach, David E. & Wohar, Mark E., 2002. "Testing the monetary model of exchange rate determination: new evidence from a century of data," Journal of International Economics, Elsevier, Elsevier, vol. 58(2), pages 359-385, December.
  16. Lee Chin & M. Azali & Zulkornain Yusop & Mohammed Yusoff, 2007. "The monetary model of exchange rate: evidence from The Philippines," Applied Economics Letters, Taylor & Francis Journals, Taylor & Francis Journals, vol. 14(13), pages 993-997.
  17. repec:ebl:ecbull:v:6:y:2004:i:8:p:1-19 is not listed on IDEAS
  18. Diamandis, Panayiotis F. & Georgoutsos, Dimitris A. & Kouretas, Georgios P., 1998. "The Monetary Approach to the Exchange Rate: Long-Run Relationships, Identification and Temporal Stability," Journal of Macroeconomics, Elsevier, Elsevier, vol. 20(4), pages 741-766, October.
  19. Venus Khim-Sen Liew, 2004. "Which Lag Length Selection Criteria Should We Employ?," Economics Bulletin, AccessEcon, vol. 3(33), pages 1-9.
  20. MacDonald, Ronald & Taylor, Mark P., 1991. "The monetary approach to the exchange rate : Long-run relationships and coefficient restrictions," Economics Letters, Elsevier, Elsevier, vol. 37(2), pages 179-185, October.
  21. Venus Khim-Sen Liew, 2004. "Nonlinear Adjustment of ASEAN-5 Real Exchange Rates: Symmetrical or Asymmetrical?," Economics Bulletin, AccessEcon, vol. 6(8), pages 1-19.
  22. Venus Khim-Sen Liew & Ahmad Zubaidi Baharumshahb & Evan Laub, 2004. "Nonlinear Adjustment towards Purchasing Power Parity in ASEAN Exchange Rates," The IUP Journal of Applied Economics, IUP Publications, IUP Publications, vol. 0(6), pages 7-18, November.
  23. Mohsen Bahmani-Oskooee, 2002. "Does black market exchange rate volatility deter the trade flows? Iranian experience," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 34(18), pages 2249-2255.
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Cited by:
  1. Lee, Chin & Law, Chee-Hong, 2013. "The Effects of Trade Openness on Malaysian Exchange Rate," MPRA Paper 45185, University Library of Munich, Germany.
  2. Liew, Venus Khim-Sen & Baharumshah, Ahmad Zubaidi & Puah, Chin-Hong, 2009. "Monetary Model of Exchange Rate for Thailand: Long-run Relationship and Monetary Restrictions," MPRA Paper 17715, University Library of Munich, Germany.

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