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Asian Currency Crisis and the Generalized PPP: Evidence from the Far East

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  • Taufiq Choudhry

Abstract

The present paper investigates the effects of the Asian currency crisis of 1997–1998 on the generalized PPP between several real exchange rates of the Far East countries. Monthly log of real exchange rates of the currencies of Thailand, Malaysia, Indonesia, the Philippines and South Korea vis‐à‐vis the US dollar and the Japanese yen during 1990–2004 are applied in the investigation. Further tests are conducted between exchange rates vis‐à‐vis the Thai baht. Tests are conducted for periods before and after the crisis. Results from the Johansen method of multivariate cointegration show a substantial change in the relationship between these real exchange rates before and after the Asian currency crisis. This result is found using rates based on three currencies: US dollar, yen and baht.

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  • Taufiq Choudhry, 2005. "Asian Currency Crisis and the Generalized PPP: Evidence from the Far East," Asian Economic Journal, East Asian Economic Association, vol. 19(2), pages 137-157, June.
    • Handle: RePEc:bla:asiaec:v:19:y:2005:i:2:p:137-157
    DOI: 10.1111/1475-4762.00098-i1
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    2. Hsing Yu, 2015. "Short-Run Determinants of the IDR/USD Exchange Rate: A Simultaneous-Equation Model," Global Economy Journal, De Gruyter, vol. 15(3), pages 311-318, September.
    3. Yu Hsing, 2015. "Short-Run Determinants of the USD/MYR Exchange Rate," Economics Bulletin, AccessEcon, vol. 35(1), pages 97-105.
    4. Ahmad Zubaidi Baharumshah & Chan Tze Haw & A.Mansur M. Masih & Evan Lau, 2011. "Financial integration of East Asian economies: evidence from real interest parity," Applied Economics, Taylor & Francis Journals, vol. 43(16), pages 1979-1990.
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    8. Tri WIDODO, 2015. "Purchasing Power Parity And Productivity-Bias Hypothesis," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 16, pages 9-38, December.
    9. Mark J. Holmes, 2010. "Are Asia‐Pacific Real Exchange Rates Stationary? A Regime‐Switching Perspective," Pacific Economic Review, Wiley Blackwell, vol. 15(2), pages 189-203, May.
    10. 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.
    11. Widodo, Tri, 2007. "Productivity Differentials and Purchasing Power Parity: Cases of Indonesia and Korea," MPRA Paper 78217, University Library of Munich, Germany.
    12. Dara Long, 2010. "The Long-Run of Purchasing Power Parity: The Case of Japan," Economics Bulletin, AccessEcon, vol. 30(1), pages 32-54.
    13. Salah A. Nusair, 2008. "Purchasing Power Parity under Regime Shifts: An Application to Asian Countries," Asian Economic Journal, East Asian Economic Association, vol. 22(3), pages 241-266, September.
    14. Long, Dara, 2008. "Purchasing Power Parity and Real Exchange Rate in Japan," MPRA Paper 11173, University Library of Munich, Germany.
    15. Salah A. Nusair & Naser I. Abumustafa, 2012. "Recursive Cointegration Analysis of Purchasing Power Parity: An Application to Asian Countries," The American Economist, Sage Publications, vol. 57(2), pages 196-209, November.
    16. Hiroyuki Taguchi, 2010. "Feasibility of Currency Unions in Asia - An Assessment Using Generalized Purchasing Power Parity -," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 6(5), pages 859-872, June.
    17. Masafumi Kozuka, 2010. "On the stationarity of Japanese-yen based purchasing power parity in the presence of the structural breaks," Economics Bulletin, AccessEcon, vol. 30(1), pages 1-9.
    18. Kisswani, Khalid/ M. & Nusair, Salah/ A., 2011. "Non-linear convergence in Asian interest rates and inflation rates," MPRA Paper 34179, University Library of Munich, Germany.
    19. Barumshah, Ahmad Zubaidi & Chan, Tze-Haw & Fountas, Stilianos, 2004. "Re-examining Purchasing Power Parity for East-Asian Currencies: 1976-2002," MPRA Paper 2025, University Library of Munich, Germany, revised 2006.
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    21. Mohsen Bahmani‐Oskooee & Scott W. Hegerty, 2009. "Purchasing Power Parity In Less‐Developed And Transition Economies: A Review Paper," Journal of Economic Surveys, Wiley Blackwell, vol. 23(4), pages 617-658, September.
    22. Mishra, Ritesh Kumar & Sharma, Chandan, 2010. "Real exchange rate behavior and optimum currency area in East Asia: Evidence from Generalized Purchasing Power Parity," International Review of Financial Analysis, Elsevier, vol. 19(3), pages 205-213, June.

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