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Currency evaluation using a big mac index for Thailand – lessons for Vietnam

Author

Listed:
  • Duc Hong Vo

    (Ho Chi Minh City Open University)

  • Anh The Vo

    (Ho Chi Minh City Open University)

Abstract

The study is conducted to evaluate Thailand's currency using both Consumer Price Index (CPI) and Big Mac Index (BMI) over the period of 1980-2013. The measurement of long-run equilibrium exchange rate is based on the purchasing power parity (PPP) using panel unit root test, panel co-integration test, and the fully modified ordinary least squares method. Empirical results from this study confirm a solid validity of PPP for CPI-based exchange rate and a weak evidence for BMI-based exchange rate. As for Thailand's currency evaluation, the result illustrates that (i) the CPI-based exchange rate provides a relatively consistent result with BMI-based exchange rate, with the exception of the 1997 Asian financial crisis and that (ii) the BMI-based exchange rate is more superior when bilaterally being evaluated between Thai Baht and US Dollar. Some lessons can be drawn for policy for both Thailand and Vietnam.

Suggested Citation

  • Duc Hong Vo & Anh The Vo, 2017. "Currency evaluation using a big mac index for Thailand – lessons for Vietnam," Economics Bulletin, AccessEcon, vol. 37(2), pages 999-1011.
    • Handle: RePEc:ebl:ecbull:eb-17-00201
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    References listed on IDEAS

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    Cited by:

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    More about this item

    Keywords

    Exchange Rate; Currency Evaluation; Purchasing Power Parity; Big Mac Parity; Panel Cointegration Test; Fully Modified Ordinary Least Square (FMOLS);
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • F3 - International Economics - - International Finance

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