Exchange Rate and Price Adjustments in the Aftermath of the Asian Crisis
This study investigates the behavioural dynamics of the real exchange rates of five East Asian economies--Indonesia, Korea, the Philippines, Singapore and Thailand--in the aftermath of the 1997 currency crisis. The results of cointegration analyses suggest that, despite the turbulent exchange rate movements during the crisis, the long-run purchasing power parity has remained to dictate the exchange rate and price relationship for all but Indonesia. The effects on the short-run dynamics are not unanimous, and there are indications of structural changes for selected countries, namely Korea and Thailand. Further, using impulse responses, we find that the speed of real exchange rate mean reversion is barely affected by the crisis, except for the Korean won. Overall, the empirical results suggest that the effects of the Asian crisis can generally be regarded as a temporary deviation rather than a fundamental shift in the real exchange rate behaviour. Copyright @ 2002 by John Wiley & Sons, Ltd. All rights reserved.
Volume (Year): 7 (2002)
Issue (Month): 1 (January)
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