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Estimating Real Effective Exchange Rate by Industry in Korea and Panel Unit-Root Tests (in Korean)

Author

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  • Hokyung Bang

    (KIEP (Korea Institute for International Economic Policy))

Abstract

This study uses the export unit value index by industry which estimates the real effective exchange rate in Korea. This study also examines the long-run PPP hypothesis with the panel unit-root test. The result from the estimation of real effective exchange rate shows that pre-East Asian financial crisis era had higher volatility in real effective exchange rate than the post-East Asian financial crisis era. In other words, the volatility has significantly decreased after the East Asian financial crisis. The results from the panel unit root tests could reject the unit root null hypothesis in favor of the alternative hypothesis of level stationary at the 5% level of significance, and the same results are shown in the presence of cross-sectional dependence. The point estimates from the results of this study suggest a half-life of deviations 1.8 years, which is shorter than Rogoff (1996)’s estimates of 3-5 years.

Suggested Citation

  • Hokyung Bang, 2010. "Estimating Real Effective Exchange Rate by Industry in Korea and Panel Unit-Root Tests (in Korean)," Economic Analysis (Quarterly), Economic Research Institute, Bank of Korea, vol. 16(4), pages 150-171, December.
    • Handle: RePEc:bok:journl:v:16:y:2010:i:4:p:150-171
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    More about this item

    Keywords

    Purchasing power parity; Half-life; Real effective exchange rate; Panel unit-root test;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange

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