Currency Crises and Purchasing Power Parity in the Asian Countries: Evidence Based on Second-Generation Panel Unit-Root Tests

Siew-Voon Soon (), Ahmad Zubaidi Baharumshah (), Nurul Sima Md. Shariff () and Saifuzzaman Ibrahim ()
Additional contact information
Siew-Voon Soon: Department of Economics, Faculty of Economics and Management, Universiti Putra Malaysia
Ahmad Zubaidi Baharumshah: Financial Economics Research Centre, Faculty of Economics and Management, Universiti Putra Malaysia
Nurul Sima Md. Shariff: Faculty of Science and Technology, Universiti Sains Islam Malaysia
Saifuzzaman Ibrahim: Department of Economics, Faculty of Economics and Management, Universiti Putra Malaysia

Malaysian Journal of Economic Studies, 2017, vol. 54, issue 1, 41-59

Abstract: This study applies a second-generation panel unit-root tests to determine the stochastic properties of real exchange rates for 14 Asian countries. Based on three popular alternative definitions of a currency crisis, we identify the several important currency crisis episodes in the region. The purchasing power parity (PPP) hypothesis was overwhelmingly supported after accommodating these heterogeneous noisy and unstable observations. Our panel unit-root test that controls for cross-sectional dependence and is robust to structural breaks confirms that the crisis in all the countries fits well with the second-generation models of currency crisis, that is, the root cause of the currency crises may not lie in economic fundamentals. PPP relation emerges when breaks and cross country dependency has been taken into account for these 14 countries.

Keywords: Asian; cross-sectional dependency; real exchange rate; second-generation models (search for similar items in EconPapers)
JEL-codes: C23 E30 F31 (search for similar items in EconPapers)
Date: 2017
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mjr:journl:v:54:y:2017:i:1:p:41-59

DOI: 10.22452/MJES.vol54no1.3

Access Statistics for this article

Malaysian Journal of Economic Studies is currently edited by Lim Kian Ping

More articles in Malaysian Journal of Economic Studies from Faculty of Business and Economics, University of Malaya & Malaysian Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Malaysian Economic Association ().