Nonlinear mean-reversion in Southeast Asian real exchange rates
AbstractWe find nonlinear mean reverting tendencies in Southeast Asian currencies by applying the newly developed nonlinear unit-root test by Park and Shintani (2005). First, with the US dollar as the numeraire currency, we find that 63% of the real exchange rates of Southeast Asian currencies turn out to be stationary. However, with the Japanese yen as the numeraire currency, we find no evidence in favour of Purchasing Power Parity (PPP) for most currencies in Southeast Asia, except for the Korean won and Taiwanese dollar. These findings imply that Southeast Asian currencies may not form a yen-dominated Asian exchange rate system. Second, when the dollar-based real exchange rates of Southeast Asian countries are nonlinear mean reverting, we find that the mean-reverting process could be well described by the Exponential Smooth Transition Autoregressive (ESTAR) model, rather than the Double Threshold Autoregressive (DTAR) or Double Logistic Smooth Transition Autoregressive (DLSTAR) model. Our results are reinforced by impulse response function and forecasting analysis.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Applied Financial Economics.
Volume (Year): 21 (2011)
Issue (Month): 19 ()
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- Frédérique Bec & Songlin Zeng, 2012.
"Are Southeast Asian Real Exchange Rates Mean Reverting?,"
- Bec, Frédérique & Zeng, Songlin, 2013. "Are Southeast Asian real exchange rates mean reverting?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 23(C), pages 265-282.
- Frédérique Bec & Songlin Zeng, 2012. "Are Southeast Asian Real Exchange Rates Mean Reverting?," THEMA Working Papers 2012-25, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
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