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REAL SHOCK OR NOMINAL SHOCK? EXCHANGE RATE MOVEMENTS IN CAMBODIA AND LAO PDR

Seiha Ok, Makoto Kakinaka and Hiroaki Miyamoto
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Seiha Ok: National Audit Authority of Cambodia, No. 16, Street 240, 12301 Phnom Penh, Cambodia

The Singapore Economic Review (SER), 2010, vol. 55, issue 04, 685-703

Abstract: This paper studies sources of fluctuations in real and nominal US dollar exchange rates in Cambodia and Lao PDR by decomposing them into the components induced by real and nominal factors. These shocks affecting real and nominal exchange rates are identified by using a structural vector autoregression (SVAR) model with the long-run neutrality restriction of Blanchard and Quah (1989). The empirical analysis demonstrates that real shocks in direction of depreciation lead to real and nominal depreciation, while nominal shocks induce long-run nominal depreciation but real appreciation in the short-run. Several economic implications are also discussed.

Keywords: Real and nominal exchange rates; real and nominal shocks; SVAR analysis; Cambodia and Lao PDR; F30; F41; O53 (search for similar items in EconPapers)
Date: 2010
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Working Paper: Real Shock or Nominal Shock? Exchange Rate Movements in Cambodia and Lao PDR (2010) Downloads
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DOI: 10.1142/S0217590810004012

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