IDEAS home Printed from
   My bibliography  Save this book

Diffusion Process for Exchange Rates in SEACEN Countries: Exchange Rate Equilibrium Level and its Volatility


  • Dr. Ryoo Sang Dai


A stochastic differential equation is at the very core of short-term dynamics of financial market, especially short-term interest rate dynamics. Various parameter restrictions on the unrestricted model have led to many special models. Recently, the diffusion process have been applied to short-term exchange rate movements, and verified from an empirical standpoint. Using short-term market exchange rate data of some SEACEN countries, this paper evaluates which special model best fits the exchange rate data, and examines the way to obtain the equilibrium level of exchange rate. The modeling and estimation framework establish an approach for explaining the volatility in exchange rate as well as for detecting the equilibrium exchange rate. For policy implications of indivisual countries, more work such as examining the structural change need to be done.

Suggested Citation

  • Dr. Ryoo Sang Dai, 2006. "Diffusion Process for Exchange Rates in SEACEN Countries: Exchange Rate Equilibrium Level and its Volatility," Staff Papers, South East Asian Central Banks (SEACEN) Research and Training Centre, number sp71, April.
  • Handle: RePEc:sea:spaper:sp71

    Download full text from publisher

    File URL:
    Download Restriction: no

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sea:spaper:sp71. 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: (Azharin). General contact details of provider: .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.