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Omitted Variables, Confidence Intervals, And The Productivity Of Exchange Rates

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  • Jonathan E. Leightner

Abstract

. A new analytical technique, named ‘Bi‐Directional Reiterative Truncated Projected Least Squares’ (BD‐RTPLS), produces reduced form estimations and less than half the error of OLS when there are omitted variables that interact with included variables. This paper develops confidence intervals for BD‐RTPLS and uses BD‐RTPLS to estimate the relationship between the exchange rate (e) and gross domestic product (GDP) using annual data from 1984 to 2000 for 23 developing Asian and Pacific countries. BD‐RTPLS produces estimates for the exchange rate multiplier (dGDP/de) for these countries and shows how omitted variables affected these multipliers across countries and over time.

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  • Jonathan E. Leightner, 2007. "Omitted Variables, Confidence Intervals, And The Productivity Of Exchange Rates," Pacific Economic Review, Wiley Blackwell, vol. 12(1), pages 15-45, February.
    • Handle: RePEc:bla:pacecr:v:12:y:2007:i:1:p:15-45
    DOI: 10.1111/j.1468-0106.2007.00337.x
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    References listed on IDEAS

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    1. Paul R. Masson, 1999. "Multiple equilibria, contagion, and the emerging market crises," Proceedings, Federal Reserve Bank of San Francisco, issue sep.
    2. Mr. Paul R Masson, 1999. "Multiple Equilibria, Contagion, and the Emerging Market Crises," IMF Working Papers 1999/164, International Monetary Fund.
    3. Mr. Paul R Masson, 1998. "Contagion: Monsoonal Effects, Spillovers, and Jumps Between Multiple Equilibria," IMF Working Papers 1998/142, International Monetary Fund.
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    Cited by:

    1. Jonathan E. Leightner, 2018. "Empirical Estimates for how Changes in China¡¯s Foreign Reserves Are Hurting Chinese Exports and Helping US Exports," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 9(2), pages 55-63, April.
    2. Jonathan E Leightner & Tomoo Inoue, 2014. "Political Instability and the Effectiveness of Economic Policies: The Case of Thailand from 1993-2013," Economy, Asian Online Journal Publishing Group, vol. 1(1), pages 20-31.
    3. Jonathan E. Leightner, 2010. "How China's Holdings of Foreign Reserves Affect the Value of the US Dollar in Europe and Asia," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 18(3), pages 24-39, May.
    4. Leightner, Jonathan E. & Inoue, Tomoo, 2008. "Capturing climate's effect on pollution abatement with an improved solution to the omitted variables problem," European Journal of Operational Research, Elsevier, vol. 191(2), pages 540-557, December.
    5. Jonathan E. Leightner, 2010. "China’s Fiscal Stimulus Package for the Current International Crisis: What does 1996–2006 Tell Us?," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 5(1), pages 1-24, March.
    6. Jonathan E. Leightner, 2013. "The Changing Effectiveness of Monetary Policy," Economies, MDPI, vol. 1(3), pages 1-16, November.

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