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East Asian Real Exchange Rates and PPP: New Evidence from Panel-data Tests

  • Ahmad Zubaidi Baharumshah
  • Raj Aggarwal
  • Chan Tze Haw

This paper empirically tests purchasing power parity (PPP) using panel unit root designed for heterogeneous panels. Monthly data of six East Asian countries (South Korea, Thailand, Indonesia, Malaysia, Singapore and the Philippines) were used to test the long-run PPP relationship. This study documents the fact that unlike the pre-crises period, mean reversion in real Asian exchange rates is a feature of the post-crises period in all six countries considered in this study. It turns out that the results found in this study based on an array of panel unit root tests appears to be invariant to the choice of the numeraire currency, namely the US and Japanese yen.

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Article provided by Taylor & Francis Journals in its journal Global Economic Review.

Volume (Year): 36 (2007)
Issue (Month): 2 ()
Pages: 103-119

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Handle: RePEc:taf:glecrv:v:36:y:2007:i:2:p:103-119
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