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The Usual Suspects? Productivity and Demand Shocks and Asia–Pacific Real Exchange Rates

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  • Menzie D. Chinn

Abstract

A productivity‐based model of East Asian relative prices and real exchange rates is tested using calculated productivity levels for China, Indonesia, Japan, Korea, Malaysia, Philippines, Singapore, Taiwan, and Thailand. Time‐series regressions of the exchange rate on relative productivity ratios indicate such a relationship for Japan, Malaysia, and the Philippines (and Indonesia and Korea when oil prices are included). Panel regression provides slightly more encouraging results when the panel encompasses a subset of countries (Indonesia, Japan, Korea, Malaysia, and the Philippines). Neither government spending nor the terms of trade appear to be important factors.

Suggested Citation

  • Menzie D. Chinn, 2000. "The Usual Suspects? Productivity and Demand Shocks and Asia–Pacific Real Exchange Rates," Review of International Economics, Wiley Blackwell, vol. 8(1), pages 20-43, February.
    • Handle: RePEc:bla:reviec:v:8:y:2000:i:1:p:20-43
    DOI: 10.1111/1467-9396.00203
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    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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