Monetary exchange rate model: supportive evidence from nonlinear testing procedures

Venus Khim-Sen Liew (), Ahmad Zubaidi Baharumshah (), Muzafar Shah Habibullah () and Habshah Midi

MPRA Paper from University Library of Munich, Germany

Abstract: Using nonlinear testing procedures relevant to the recent literature, this study provides evidence of nonlinear adjustment of nominal exchange rate towards monetary fundamentals in the context of ASEAN-5 countries. While it supports earlier findings supportive of monetary exchange rate model in this region using the linear testing procedures, this study provides insightful information in explaining why persistent misalignments between nominal exchange rate and monetary fundamentals are often observed in the sample data.

Keywords: monetary model; exchange rate; nonlinear; unit root test; linearity test; STAR model (search for similar items in EconPapers)
JEL-codes: C32 F31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-ifn, nep-mon and nep-opm
Date: 2008
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Persistent link: http://EconPapers.repec.org/RePEc:pra:mprapa:7293

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