Deviations and mean reversion to purchasing power parity in the Asian currency crisis of 1997
AbstractThis study analyses the process of mean reversion towards purchasing power parity (PPP) for a sample of Asian countries around the 1997 crisis. It is found that appreciation relative to PPP is evident prior to the 1997 crash period. Correction occurs from 1997 onwards, a period marked by extreme movements in exchange rates with both appreciation and depreciation relative to the PPP rate over relatively short periods. The key result of this paper is that although reversion towards PPP is apparent for mean, though not statistically significant, it is clear that there is a substantial, statistically significant change in variance from 1997 onwards. This result has implications both for economic modelling of crash periods and for appropriate choice of statistical tests.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Applied Economics.
Volume (Year): 33 (2001)
Issue (Month): 9 ()
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- Akarim, Yasemin Deniz & Sevim, Serafettin, 2013. "The impact of mean reversion model on portfolio investment strategies: Empirical evidence from emerging markets," Economic Modelling, Elsevier, vol. 31(C), pages 453-459.
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