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Capital Flows and Real Exchange Rate Behavior: Evidence from Pre-Crises ASEAN Economies

In: Studies In East Asian Economies Capital Flows, Exchange Rates and Monetary Policy

Author

Listed:
  • Shibeshi Ghebre Kahsay

    (Abu Dhabi Women's College, UAE)

  • Jagdish Handa

    (McGill University, Canada)

Abstract

This chapter develops a three-good model for the internal real exchange rate to identify the fundamental determinants of the internal real exchange rates for exports and imports. The examination of the time series properties of the variables suggests that the internal real exchange rates in the ASEAN-4 countries were indeed driven by the fundamentals derived from our model. The data support the absence of misalignment between the actual and equilibrium real exchange rates and suggests that the movements in the actual real exchange rates were equilibrium responses to changes in their fundamental determinants.

Suggested Citation

  • Shibeshi Ghebre Kahsay & Jagdish Handa, 2011. "Capital Flows and Real Exchange Rate Behavior: Evidence from Pre-Crises ASEAN Economies," World Scientific Book Chapters, in: Studies In East Asian Economies Capital Flows, Exchange Rates and Monetary Policy, chapter 3, pages 53-139, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789814338950_0003
    as

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