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Is the Exchange Rate of Bangladesh Mean Reverting? A Panel Unit Root Approach

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  • S. M Woahid Murad

Abstract

This paper evaluates whether the exchange rate of Bangladesh is mean reverting or not by applying first-generation and second-generation panel unit root test approaches. The paper considers annual data from 1986 to 2011 of major twenty-two trading partners of Bangladesh. Although some inconclusive outcomes emerge from the first-generation tests, the second-generation test reconciles the controversy and confirms that the weak form of PPP is relevant for Bangladesh. Consequently, the bilateral exchange rate of Bangladesh is mean reverting and the PPP hypothesis can be considered as an exchange rate determinant in the long-run.

Suggested Citation

  • S. M Woahid Murad, 2016. "Is the Exchange Rate of Bangladesh Mean Reverting? A Panel Unit Root Approach," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 6(2), pages 100-108.
    • Handle: RePEc:asi:aeafrj:v:6:y:2016:i:2:p:100-108:id:1451
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    Cited by:

    1. S. M. Woahid Murad & Mohammad Amzad Hossain, 2018. "The ASEAN experience of the purchasing power parity theory," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 4(1), pages 1-10, December.

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