EconPapers    
Economics at your fingertips  
 

ON SINGAPORE DOLLAR–U.S. DOLLAR AND PURCHASING POWER PARITY

Venus Liew (), Ahmad Zubaidi Baharumshah () and Kian-Ping Lim ()

The Singapore Economic Review (SER), 2004, vol. 49, issue 01, 71-84

Abstract: This study re-examines the validity of the relationship between the Singapore dollar–U.S. dollar exchange rate and relative prices using the latest econometric methodologies that account for non-linearity. Among others, this study finds Exponential Smooth Transition Autoregressive (ESTAR)-type non-linear mean-reverting adjustment process of the nominal Singapore dollar–U.S. dollar rate towards the consumer price index ratio. Unlike previous findings of a linear cointegration relationship between the nominal Singapore dollar–U.S. dollar exchange rate and consumer price index ratio, this study shows that the relationship is in fact non-linear in nature. The major economic implications of our findings are: (1) policy makers need to take non-linearity into consideration in their policy decisions; (2) the Monetary Authority of Singapore (MAS) is able to maintain the macroeconomic equilibrium despite the authority's strong dollar policy; and (3) one should keep track of Singapore's monetary policy and other innovations in aggregate demand in order to closely monitor the movement of the Singapore exchange rate.

Keywords: Exchange rates; Non-linearity; Purchasing power parity; Exponential smooth transition autoregressive (ESTAR) model; Singapore (search for similar items in EconPapers)
Date: 2004
References: View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S0217590804000809
Access to full text is restricted to subscribers.

Related works:
Working Paper: On Singaporean Dollar-U.S. Dollar and Purchasing Power Parity (2004) Downloads
Working Paper: On Singaporean Dollar-U.S. Dollar and Purchasing Power Parity (2004) Downloads
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:wsi:serxxx:v:49:y:2004:i:01:n:s0217590804000809

Ordering information: This journal article can be ordered from

DOI: 10.1142/S0217590804000809

Access Statistics for this article

The Singapore Economic Review (SER) is currently edited by Euston Quah

More articles in The Singapore Economic Review (SER) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().

 
Page updated 2019-06-11
Handle: RePEc:wsi:serxxx:v:49:y:2004:i:01:n:s0217590804000809