Nonlinear mean-reversion in Southeast Asian real exchange rates

Doo-Yull Choi, Bong-Han Kim and See-Won Kim

Applied Financial Economics, 2011, vol. 21, issue 19, 1409-1421

Abstract: We find nonlinear mean reverting tendencies in Southeast Asian currencies by applying the newly developed nonlinear unit-root test by Park and Shintani (2005). First, with the US dollar as the numeraire currency, we find that 63% of the real exchange rates of Southeast Asian currencies turn out to be stationary. However, with the Japanese yen as the numeraire currency, we find no evidence in favour of Purchasing Power Parity (PPP) for most currencies in Southeast Asia, except for the Korean won and Taiwanese dollar. These findings imply that Southeast Asian currencies may not form a yen-dominated Asian exchange rate system. Second, when the dollar-based real exchange rates of Southeast Asian countries are nonlinear mean reverting, we find that the mean-reverting process could be well described by the Exponential Smooth Transition Autoregressive (ESTAR) model, rather than the Double Threshold Autoregressive (DTAR) or Double Logistic Smooth Transition Autoregressive (DLSTAR) model. Our results are reinforced by impulse response function and forecasting analysis.

Keywords: purchasing power parity; nonlinear unit root test; Asian real exchange rates; dollar and yen (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.tandfonline.com/doi/abs/10.1080/09603107.2011.572851 (text/html)
Access to full text is restricted to subscribers.

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:taf:apfiec:v:21:y:2011:i:19:p:1409-1421

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAFE20

DOI: 10.1080/09603107.2011.572851

Access Statistics for this article

Applied Financial Economics is currently edited by Anita Phillips

More articles in Applied Financial Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().