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Use of Deviations of Purchasing Power Parity and Interest Rate Parity to Clarify the 1997 Asian Financial Crisis

Author

Listed:
  • Mao-Wei Hung

    (Department of International Business, National Taiwan University, Taiwan, R.O.C.)

  • Yin-Ching Jan

    (Department of Industrial Engineering and Management, National Chin-Yi Institute of Technology, Taiwan, R.O.C.)

Abstract

This study is an attempt to examine whether the deviations of purchasing power parity and uncover interest rate parity Granger-cause the 1997 Asian financial crisis by using vector autoregression and Granger causality tests. The results show that the purchasing power parity and uncover interest rate parity do not hold for most Asian markets. We find weak evidence to support that the deviations of purchasing power parity and uncover interest rate parity have the power to explicate the origin of the financial crisis.

Suggested Citation

  • Mao-Wei Hung & Yin-Ching Jan, 2002. "Use of Deviations of Purchasing Power Parity and Interest Rate Parity to Clarify the 1997 Asian Financial Crisis," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 5(02), pages 195-218.
    • Handle: RePEc:wsi:rpbfmp:v:05:y:2002:i:02:n:s0219091502000754
    DOI: 10.1142/S0219091502000754
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    Citations

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    Cited by:

    1. Angelos Kanas & Angelos Kotios & Panagiotis D. Zervopoulos, 2019. "Semi-parametric real exchange rates dynamics," Review of Quantitative Finance and Accounting, Springer, vol. 52(2), pages 643-656, February.
    2. Salah A. Nusair, 2008. "Purchasing Power Parity under Regime Shifts: An Application to Asian Countries," Asian Economic Journal, East Asian Economic Association, vol. 22(3), pages 241-266, September.
    3. Salah Nusair, 2012. "Nonlinear adjustment of Asian real exchange rates," Economic Change and Restructuring, Springer, vol. 45(3), pages 221-246, August.
    4. Salah A. Nusair & Naser I. Abumustafa, 2012. "Recursive Cointegration Analysis of Purchasing Power Parity: An Application to Asian Countries," The American Economist, Sage Publications, vol. 57(2), pages 196-209, November.

    More about this item

    Keywords

    Financial crisis; Granger causality; Interest rate parity; Purchasing power parity; Vector autoregression;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance

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