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The Changing Dynamics of the East Asian Real Exchange Rates after the Financial Crisis: Further Evidence on Mean Reversion

Ahmad Zubaidi Baharumshah (), Tze-Haw Chan () and Raj Aggarwal ()

MPRA Paper from University Library of Munich, Germany

Abstract: Using an improved statistical methodology including tests designed for heterogeneous panels, this paper tests for mean reversion in monthly US Dollar based real exchange rates for nine East Asian countries, including those that were severely affected by the 1997 Asian financial crises. The empirical results reveals mean reversion in real Asian exchange rates is a feature of the post-crises sub-period (1997-2005) but not of the pre-crises sub-period (1981-1996). Additionally, we make a point that a faster speed of convergence to PPP and lower adjustment half-lives for real exchange rates compared to those reported for major industrialized country currencies and especially so for the post-crises period in Asia.

Keywords: Purchasing power parity; Panel unit root tests; Asian financial crisis (search for similar items in EconPapers)
JEL-codes: F40 C12 C23 F31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-ifn and nep-sea
Date: 2006-05, Revised 2007-11-22
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:6090

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