Are Real Exchange Rates Mean Reverting in Developing Economies in Asia? A Covariate Stationarity Approach

Ching-Chuan Tsong

International Economic Journal, 2010, vol. 24, issue 3, 397-412

Abstract: Previous studies on the stationarity properties of the real exchange rates in developing countries in Asia have generally produced mixed results. The unit root behavior is puzzling because it contradicts the purchasing power parity (PPP) hypothesis. This study examines international data on 15 developing countries by employing the covariate stationarity test proposed by Jansson (2004). The covariates used are motivated by economic theory, including inflation, money supply, income and current account. Our results show strong evidence in support of the hypothesis. On the contrary, the unit root test with the alternative hypothesis of nonlinear mean reversion provides inadequate evidence in favor of PPP.

Keywords: Real exchange rate; purchasing power parity; covariate stationarity test (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.tandfonline.com/doi/abs/10.1080/10168737.2010.504778 (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:intecj:v:24:y:2010:i:3:p:397-412

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RIEJ20

DOI: 10.1080/10168737.2010.504778

Access Statistics for this article

International Economic Journal is currently edited by Jaymin Lee Editor

More articles in International Economic Journal from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().