Purchasing Power Parity and the Real Exchange Rate in Bangladesh: A Nonlinear Analysis

Ibrahim Chowdhury

No 14, Working Paper Series in Economics from University of Cologne, Department of Economics

Abstract: The long-run purchasing power parity (PPP) hypothesis is examined using data for Bangladesh and its major trading partners - the US, Euro area, Japan and India - during the period 1994 to 2002. We apply recently developed nonlinear econometric techniques and provide strong evidence for highly nonlinear meanreversion of real bilateral Bangladesh taka exchange rates toward a stable long-run equilibrium. Our findings imply strong support for the validity of long-run PPP as well as for the theoretical models which predict nonlinear adjustment in real exchange rates.

Keywords: real exchange rate; purchasing power parity; nonlinearity (search for similar items in EconPapers)
JEL-codes: F31 (search for similar items in EconPapers)
Date: 2004-10-21
New Economics Papers: this item is included in nep-ifn
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Citations: View citations in EconPapers (2)

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Journal Article: Purchasing Power Parity and the Real Exchange Rate in Bangladesh: A Nonlinear Analysis (2007)
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