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

Gilles de Truchis and Benjamin Keddad ()

Journal of International Financial Markets, Institutions and Money, 2013, vol. 26, issue C, 394-412

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.

Keywords: Monetary union; Fractional cointegration; Generalized purchasing power parity; ASEAN (search for similar items in EconPapers)
JEL-codes: F31 F33 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Related works:
Working Paper: Southeast Asian monetary integration: New evidences from fractional cointegration of real exchange rates (2013)
Working Paper: South East Asian Monetary Integration: New Evidences from Fractional Cointegration of Real Exchange Rates (2012)
Working Paper: South East Asian Monetary Integration: New Evidences from Fractional Cointegration of Real Exchange Rates (2012)
Working Paper: South East Asian Monetary Integration: New Evidences from Fractional Cointegration of Real Exchange Rates (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:26:y:2013:i:c:p:394-412

DOI: 10.1016/j.intfin.2013.07.005

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