Nonlinear Mean Reversion in Real Exchange Rates: Evidence from the ASEAN-5

Ahmad Zubaidi Baharumshah (), Venus Khim-Sen Liew () and Evan Lau ()

International Trade from EconWPA

Abstract: Utilizing formal nonlinear unit root test (Sarno, The behavior of US public debt: a nonlinear perspective. Economics Letters 2001: 119 – 125), this study provides robust evidence of nonlinear mean reversion in the real exchange rates of 4 major ASEAN countries. We conclude that the bulk of the evidence based on conventional unit root tests may be biased against long run Purchasing Power Parity (PPP)

Keywords: Purchasing power parity; Real exchange rate; ASEAN; Nonlinear unit root test; STAR model. (search for similar items in EconPapers)
JEL-codes: F31 F32 (search for similar items in EconPapers)
Date: Written 2003-08-03
Note: Type of Document -
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