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The linearity property of ASEAN-5 real exchange rates in pre-ASEAN currency crisis period


Liew, Venus Khim-Sen and Baharumshah, Ahmad Zubaidi and Lim, Kian Ping (2004) The linearity property of ASEAN-5 real exchange rates in pre-ASEAN currency crisis period. International Journal of Management Studies (IJMS), 11 (2). pp. 43-61. ISSN 0127-8983

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Official URL: http://ijms.uum.edu.my

Abstract

This study extends the work of Liew et al. (2003) in two directions. First, it examines whether or not the 1997 Asian currency crisis has resulted in the nonlinearity of ASEAN-5 real exchange rates. Second, it characterizes the type of nonlinearity governing these rates. Results of the current study, among others, show that nonlinearity existed even before the outbreak of the crisis, suggesting that nonlinearity in these rates is not crisis-induced. Moreover, this study provides robust empirical evidence that most of the pre-crisis ASEAN-5 real exchange rates exhibit LSTAR-type nonlinear dynamics, indicating that the market responds with respect to (1) appreciation and depreciation of real exchange rates and (2) the overvaluation and undervaluation of nominal exchange rates towards the purchasing power parity equilibrium levels are asymmetrical in nature. This study is important to central banks and other foreign exchange market players in this ASEAN region especially in the sense that it provides insightful information regarding the effective way of understanding, measuring and monitoring the ASEAN-5 exchange rates movement.

Item Type: Article
Uncontrolled Keywords: Linearity test; ASEAN-5; Real exchange rates
Subjects: H Social Sciences > HG Finance
Divisions: UNSPECIFIED
Depositing User: Mrs. Norazmilah Yaakub
Date Deposited: 30 Sep 2010 03:26
Last Modified: 30 Sep 2010 03:26
URI: http://repo.uum.edu.my/id/eprint/740

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