IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

Real Exchange Rates and Productivity: Evidence from Asia

  • VIKAS KAKKAR
  • ISABEL YAN

This paper examines a productivity-based explanation of the long run real exchange rate movements of six Asian economies. Using industry level data, we construct total factor productivities (TFPs) for the tradable and nontradable sectors. We find that (a) within each country the relative price of nontradable goods is cointegrated with the sectoral TFP differential, and (b) the real exchange rates are cointegrated with the home and foreign sectoral TFP differentials. Using the predicted real exchange rate as a measure of the "long-run equilibrium", we find that most Asian economies�real exchange rates are overvalued before the Asian Financial Crisis.

(This abstract was borrowed from another version of this item.)

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://hdl.handle.net/10.1111/j.1538-4616.2011.00488.x
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.

Volume (Year): 44 (2012)
Issue (Month): (03)
Pages: 301-322

as
in new window

Handle: RePEc:mcb:jmoncb:v:44:y:2012:i::p:301-322
Contact details of provider: Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Engel, Charles, 2000. "Long-run PPP may not hold after all," Journal of International Economics, Elsevier, vol. 51(2), pages 243-273, August.
  2. Ben S. Bernanke & Refet S. Gürkaynak, 2002. "Is Growth Exogenous? Taking Mankiw, Romer, and Weil Seriously," NBER Chapters, in: NBER Macroeconomics Annual 2001, Volume 16, pages 11-72 National Bureau of Economic Research, Inc.
  3. Chang, Yoosoon, 2002. "Bootstrap Unit Root Tests in Panels with Cross-Sectional Dependency," Working Papers 2000-01, Rice University, Department of Economics.
  4. Mario J. Crucini & Mototsugu Shintani, 2006. "Persistence in Law-Of-One-Price Deviations: Evidence from Micro-Data," Vanderbilt University Department of Economics Working Papers 0616, Vanderbilt University Department of Economics.
  5. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
  6. Kakkar, Vikas & Ogaki, Masao, 1999. "Real exchange rates and nontradables: A relative price approach," Journal of Empirical Finance, Elsevier, vol. 6(2), pages 193-215, April.
  7. Nelson C. Mark & Masao Ogaki & Donggyu Sul, 2005. "Dynamic Seemingly Unrelated Cointegrating Regressions," Review of Economic Studies, Oxford University Press, vol. 72(3), pages 797-820.
  8. DRINE Imed & RAULT Christophe, . "Does the Balassa-Samuelson Hypothesis Hold for Asian Countries? An Empirical Analysis using Panel Data Cointegration Tests," EcoMod2003 330700045, EcoMod.
  9. Nelson C. Mark & Donggyu Sul, 2002. "Cointegration Vector Estimation by Panel DOLS and Long-Run Money Demand," NBER Technical Working Papers 0287, National Bureau of Economic Research, Inc.
  10. Douglas Gollin, 2002. "Getting Income Shares Right," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 458-474, April.
  11. Masao Ogaki & Sungwook Park, 2007. "Long-run real exchange rate changes and the properties of the variance of k-differences," Working Papers 07-05, Ohio State University, Department of Economics.
  12. Feenstra, Robert & Hiau Looi Kee, 2004. "On the measurement of product variety in trade," Policy Research Working Paper Series 3213, The World Bank.
  13. Betts, Caroline M. & Kehoe, Timothy J., 2006. "U.S. real exchange rate fluctuations and relative price fluctuations," Journal of Monetary Economics, Elsevier, vol. 53(7), pages 1297-1326, October.
  14. Chang, Yoosoon & Park, Joon & Song, Kevin, 2002. "Bootstrapping Cointegrating Regressions," Working Papers 2002-04, Rice University, Department of Economics.
  15. Gasper A. Garofalo & Steven Yamarik, 2002. "Regional Convergence: Evidence From A New State-By-State Capital Stock Series," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 316-323, May.
  16. Stockman, Alan C & Tesar, Linda L, 1995. "Tastes and Technology in a Two-Country Model of the Business Cycle: Explaining International Comovements," American Economic Review, American Economic Association, vol. 85(1), pages 168-85, March.
  17. Kao, Chihwa, 1999. "Spurious regression and residual-based tests for cointegration in panel data," Journal of Econometrics, Elsevier, vol. 90(1), pages 1-44, May.
  18. Vikas Kakkar, 2003. "The Relative Price of Nontraded Goods and Sectoral Total Factor Productivity: An Empirical Investigation," The Review of Economics and Statistics, MIT Press, vol. 85(2), pages 444-452, May.
  19. Joon-Kyung Kim & Sang Dal Shim & Jun-Il Kim, 1995. "The Role of the Government in Promoting Industrialization and Human Capital Accumulation in Korea," NBER Chapters, in: Growth Theories in Light of the East Asian Experience, NBER-EASE Volume 4, pages 181-200 National Bureau of Economic Research, Inc.
  20. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, December.
  21. Peter Pedroni, 2004. "Panel Cointegration: Asymptotic and Finite Sample Properties of Pooled Time Series Tests with an Application to the PPP Hypothesis," Department of Economics Working Papers 2004-15, Department of Economics, Williams College.
  22. Yin-Wong Cheung & Kon S. Lai, 1999. "On Cross-Country Differences in the Persistence of Real Exchange Rates," CESifo Working Paper Series 218, CESifo Group Munich.
  23. Alba, Joseph D. & Papell, David H., 2007. "Purchasing power parity and country characteristics: Evidence from panel data tests," Journal of Development Economics, Elsevier, vol. 83(1), pages 240-251, May.
  24. Bela Balassa, 1964. "The Purchasing-Power Parity Doctrine: A Reappraisal," Journal of Political Economy, University of Chicago Press, vol. 72, pages 584.
  25. Mark, Nelson C. & Choi, Doo-Yull, 1997. "Real exchange-rate prediction over long horizons," Journal of International Economics, Elsevier, vol. 43(1-2), pages 29-60, August.
  26. Ariel Burstein & Martin Eichenbaum & Sergio Rebelo, 2005. "The Importance of Nontradable Goods' Prices in Cyclical Real Exchange Rate Fluctuations," RCER Working Papers 523, University of Rochester - Center for Economic Research (RCER).
  27. Gregory C. Chow, 1993. "Capital Formation and Economic Growth in China," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 809-842.
  28. Stephen B. DeLoach, 1997. "Do Relative Prices of Non-traded Goods Determine Long-Run Real Exchange Rates?," Canadian Journal of Economics, Canadian Economics Association, vol. 30(4), pages 891-909, November.
  29. Ehsan U. Choudhri & Mohsin S. Khan, 2005. "Real Exchange Rates in Developing Countries: Are Balassa-Samuelson Effects Present?," IMF Staff Papers, Palgrave Macmillan, vol. 52(3), pages 2.
  30. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:mcb:jmoncb:v:44:y:2012:i::p:301-322. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)

or (Christopher F. Baum)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.