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Exchange Rate and Price Adjustments in the Aftermath of the Asian Crisis

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  • Fujii, Eiji

Abstract

This study investigates the behavioural dynamics of the real exchange rates of five East Asian economies--Indonesia, Korea, the Philippines, Singapore and Thailand--in the aftermath of the 1997 currency crisis. The results of cointegration analyses suggest that, despite the turbulent exchange rate movements during the crisis, the long-run purchasing power parity has remained to dictate the exchange rate and price relationship for all but Indonesia. The effects on the short-run dynamics are not unanimous, and there are indications of structural changes for selected countries, namely Korea and Thailand. Further, using impulse responses, we find that the speed of real exchange rate mean reversion is barely affected by the crisis, except for the Korean won. Overall, the empirical results suggest that the effects of the Asian crisis can generally be regarded as a temporary deviation rather than a fundamental shift in the real exchange rate behaviour. Copyright @ 2002 by John Wiley & Sons, Ltd. All rights reserved.

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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal International Journal of Finance & Economics.

Volume (Year): 7 (2002)
Issue (Month): 1 (January)
Pages: 1-14

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Handle: RePEc:ijf:ijfiec:v:7:y:2002:i:1:p:1-14

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Cited by:
  1. Zurbruegg, R. & Allsopp, L., 2004. "Purchasing power parity and the impact of the East Asian currency crisis," Journal of Asian Economics, Elsevier, vol. 15(4), pages 739-758, August.
  2. Cheung, Yin-Wong & Chinn, Menzie D. & Fujii, Eiji, 2003. "China, Hong Kong, and Taiwan: A quantitative assessment of real and financial integration," China Economic Review, Elsevier, vol. 14(3), pages 281-303.
  3. repec:ebl:ecbull:v:15:y:2005:i:6:p:1-9 is not listed on IDEAS
  4. Yu Hsing, 2006. "Analysis of Short-term Exchange Rate Movements in Korea: Application of an Extended Mundell-Fleming Model," Global Economic Review, Taylor & Francis Journals, vol. 35(2), pages 145-151.
  5. Vo, Long H. & Roberts, Leigh, 2014. "On long memory behaviour and predictability of financial markets," Working Paper Series 3361, Victoria University of Wellington, School of Economics and Finance.
  6. Baharumshah, Ahmad Zubaidi & Liew, Venus Khim-Sen & Chowdhury, Ibrahim, 2010. "Asymmetry dynamics in real exchange rates: New results on East Asian currencies," International Review of Economics & Finance, Elsevier, vol. 19(4), pages 648-661, October.
  7. Baharumshah, Ahmad Zubaidi & Chan, Tze-Haw & Aggarwal, Raj, 2006. "The Changing Dynamics of the East Asian Real Exchange Rates after the Financial Crisis: Further Evidence on Mean Reversion," MPRA Paper 6090, University Library of Munich, Germany, revised 22 Nov 2007.
  8. Salah Nusair, 2012. "Nonlinear adjustment of Asian real exchange rates," Economic Change and Restructuring, Springer, vol. 45(3), pages 221-246, August.
  9. Angelos Kanas, 2009. "Real exchange rates and developing countries," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 14(3), pages 280-299.

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