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Real Shock Or Nominal Shock? Exchange Rate Movements In Cambodia And Lao Pdr

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Author Info

  • SEIHA OK

    (National Audit Authority of Cambodia, No. 16, Street 240, 12301 Phnom Penh, Cambodia)

  • MAKOTO KAKINAKA

    ()
    (Graduate School of International Relations, International University of Japan, 777 Kokusai-cho, Minami-Uonuma, Niigata 949-7277, Japan)

  • HIROAKI MIYAMOTO

    ()
    (Graduate School of International Relations, International University of Japan, 777 Kokusai-cho, Minami-Uonuma, Niigata 949-7277, Japan)

Abstract

This paper studies sources of fluctuations in real and nominal US dollar exchange rates in Cambodia and Lao PDR by decomposing them into the components induced by real and nominal factors. These shocks affecting real and nominal exchange rates are identified by using a structural vector autoregression (SVAR) model with the long-run neutrality restriction of Blanchard and Quah (1989). The empirical analysis demonstrates that real shocks in direction of depreciation lead to real and nominal depreciation, while nominal shocks induce long-run nominal depreciation but real appreciation in the short-run. Several economic implications are also discussed.

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Bibliographic Info

Article provided by World Scientific Publishing Co. Pte. Ltd. in its journal The Singapore Economic Review.

Volume (Year): 55 (2010)
Issue (Month): 04 ()
Pages: 685-703

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Handle: RePEc:wsi:serxxx:v:55:y:2010:i:04:p:685-703

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Keywords: Real and nominal exchange rates; real and nominal shocks; SVAR analysis; Cambodia and Lao PDR; F30; F41; O53;

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References

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Cited by:
  1. Kubo, Koji, 2013. "Sources of fluctuations in parallel exchange rates and policy reform in Myanmar," IDE Discussion Papers 388, Institute of Developing Economies, Japan External Trade Organization(JETRO).

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