Are Southeast Asian Real Exchange Rates Mean Reverting?

Frédérique Bec and Songlin Zeng ()

Working Papers from HAL

Abstract: Since the late nineties, both theoretical and empirical analysis devoted to the real exchange rate suggest that their dynamics might be well approximated by nonlinear models. This paper examines this possibility for post-1970 monthly ASEAN-5 data, extending the existing research in two directions. First, we use recently developed unit root tests which allow for more flexible nonlinear stationary models under the alternative than the commonly used Self-Exciting Threshold or Exponantial Smooth Transition AutoRegressions. Second, while different nonlinear models survive the mis-specification tests, a Monte Carlo experiment from generalized impulse response functions is used to compare their relative relevance. Our results i) support the nonlinear mean-reverting hypothesis, and hence the Purchasing Power Parity, in most of the ASEAN-5 countries and ii) point to the Multiple Regime-Logistic Smooth Transition and the Exponantial Smooth Transition AutoRegression models as the most likely data generating processes of these real exchange rates.

Keywords: Purchasing Power Parity; Nonlinear ThresholdModels; Southeast Asian Real Exchange Rates (search for similar items in EconPapers)
Date: 2012-02-07
New Economics Papers: this item is included in nep-cba and nep-sea
Note: View the original document on HAL open archive server: https://hal.science/hal-00685812
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Published in 2012

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Related works:
Journal Article: Are Southeast Asian real exchange rates mean reverting? (2013)
Working Paper: Are Southeast Asian Real Exchange Rates Mean Reverting? (2013)
Working Paper: Are Southeast Asian Real Exchange Rates Mean Reverting? (2012)
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