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Southeast Asian monetary integration: New evidences from fractional cointegration of real exchange rates

Author

Listed:
  • Gilles De Truchis

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

  • Benjamin Keddad

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

Abstract

This paper examines generalized purchasing power parity theory (G-PPP) among the ASEAN-5 countries. Implementing both the rank analysis and the regression-based analysis of the cointegrating system's, we identify several weak fractional cointegration relationships. Accordingly, cointegrating errors of real exchange rates (RERs) are highly persistent but mean-reverting. Our findings contrast with all previous studies that restrict their investigations to the traditional I(1)/I(0) cointegration. Since RERs are tied through a long memory process, empirical models of G-PPP theory that ignore such a feature should be misspecified. Finally, our results support further monetary integration among different sub-groups of the ASEAN-5 countries as they share long-run comovements.

Suggested Citation

  • Gilles De Truchis & Benjamin Keddad, 2013. "Southeast Asian monetary integration: New evidences from fractional cointegration of real exchange rates," Post-Print hal-01498261, HAL.
    • Handle: RePEc:hal:journl:hal-01498261
    DOI: 10.1016/j.intfin.2013.07.005
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    Cited by:

    1. Guglielmo Maria Caporale & Luis Gil‐Alana, 2020. "Prospects for a Monetary Union in the East Africa Community: Some Empirical Evidence," South African Journal of Economics, Economic Society of South Africa, vol. 88(2), pages 174-185, June.
    2. Gilles de Truchis & Benjamin Keddad, 2013. "Analyzing Financial Integration in East Asia through Fractional Cointegration in Volatilities," Working Papers halshs-00862256, HAL.
    3. Soon, Siew-Voon & Baharumshah, Ahmad Zubaidi & Mohamad Shariff, Nurul Sima, 2017. "The persistence in real interest rates: Does it solve the intertemporal consumption behavior puzzle?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 50(C), pages 36-51.
    4. Keddad, Benjamin & Sato, Kiyotaka, 2022. "The influence of the renminbi and its macroeconomic determinants: A new Chinese monetary order in Asia?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 79(C).
    5. Kentaro Kawasaki & Zhi-Qian Wang, 2015. "Is Economic Development Promoting Monetary Integration in East Asia?," IJFS, MDPI, vol. 3(4), pages 1-31, October.
    6. Giorgio Canarella & Stephen M. Miller, 2016. "Inflation Targeting: New Evidence from Fractional Integration and Cointegration," Working papers 2016-08, University of Connecticut, Department of Economics.
    7. Thampanya, Natthinee & Wu, Junjie & Nasir, Muhammad Ali & Liu, Jia, 2020. "Fundamental and behavioural determinants of stock return volatility in ASEAN-5 countries," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 65(C).
    8. Zhang, Tiantian & Matthews, Kent, 2019. "Assessing the degree of financial integration in ASEAN—A perspective of banking competitiveness," Research in International Business and Finance, Elsevier, vol. 47(C), pages 487-500.
    9. Jamshaid Ur Rehman & Muhammad Nadeem Javaid & Nisar Ahmad, 2025. "Prospects for connectivity and integration between Pakistan and ASEAN + 3 + 3 countries through the lens of optimal currency area theory," Quality & Quantity: International Journal of Methodology, Springer, vol. 59(3), pages 2825-2859, June.
    10. Canarella, Giorgio & Miller, Stephen M., 2017. "Inflation targeting and inflation persistence: New evidence from fractional integration and cointegration," Journal of Economics and Business, Elsevier, vol. 92(C), pages 45-62.

    More about this item

    Keywords

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    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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