On Singaporean Dollar and Purchasing Power Parity
Venus Liew (),
Ahmad Zubaidi Baharumshah () and
Kian-Ping Lim ()
International Finance from University Library of Munich, Germany
This study re-examines the validity of relationship between Singapore Dollar-US Dollar exchange rate and the relative price using the latest econometric methodologies that accounts 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-US dollar rate towards consumer price index ratio. Unlike previous finding of linear cointegration relationship between nominal Singapore Dollar-US 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 includes: (1) Policy makers need to take non-linearity into consideration on their policy decision; (2) Monetary Authority of Singapore (MAS) is able to maintain the macroeconomic equilibrium albeit the authority’s strong dollar policy; and (3) One should keep track on Singapore monetary policy and other innovations in aggregate demand in order to closely monitor the movement of Singapore exchange rate.
Keywords: Exchange rates; Non-linearity, Purchasing Power Parity; Exponential Smooth Transition Autoregressive (ESTAR), Exchange rates; Non-linearity, Purchasing Power Parity; Exponential Smooth Transition Autoregressive (ESTAR), Singapore. (search for similar items in EconPapers)
JEL-codes: F31 F32 (search for similar items in EconPapers)
Note: Type of Document - pdf
References: Add references at CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Working Paper: On Singaporean Dollar and Purchasing Power Parity (2004)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpif:0411001
Access Statistics for this paper
More papers in International Finance from University Library of Munich, Germany
Bibliographic data for series maintained by EconWPA ().