Abstract: This paper empirically tests purchasing power parity (PPP) using panel unit root designed for heterogeneous panels. Monthly data of six East Asian countries (South Korea, Thailand, Indonesia, Malaysia, Singapore and the Philippines) were used to test the long-run PPP relationship. This...

This study finds that Purchasing Power Parity holds in the long-run for Azerbaijan, Kazakhstan and Kyrgyzstan, based on Breitung’s (2001) rank tests for cointegration. Results from further analysis indicates that nominal exchange rates and relative prices are nonlinearly interrelated. Trade...

In this article, we re-examine the empirical validity of the Purchasing Power Parity (PPP) theory for the Turkish economy. For this purpose, an empirical model is constructed using some contemporaneous estimation techniques such as multivariate co-integration and vector error correction...

The main objective of this study is to use disaggregate data between Thailand and its major trading partners to examine the validity of the purchasing power parity (PPP). Bilateral exchange rates between domestic currency (Thai baht) and each currency of major trading partners as well as the...

The massive stocks of foreign exchange reserves, mostly held in the form of U.S. T-Bonds by emerging economies, are still an important puzzle. Why do emerging economies continue to willingly loan to the United States despite the low rates of return? We propose that a dynamic general equilibrium...

Recent empirical studies have highlighted that valuation effects associated with fluctuations of nominal exchange rates are one of the key components that drive the behaviour of the net foreign assets position of a country. In this paper, we propose a two-country overlapping-generations model of...

In the current paper, a new and simple currency valuation model called the ratio model is proposed based on the Penn effect (a systematic deviation of the purchasing power parity (PPP)). The ratio model, which reduces the uncertainty of the econometric specification that many other valuation...

We propose an alternative model and method to reconcile the puzzling feature in the relationship between the real exchange rate and real interest rate differentials. Our simple two-country model with preset prices, along with firms’ misperception about the future exchange rate, implies that...

Following methodological approach proposed by Edwards, the paper estimates empirically Russia's equilibrium real exchange rate (ERER) for the period 1995–2003. ERER is defined as the relative price of non-tradables to tradables consistent with the simultaneous achievement of internal and...

We study the behavior of the Real Effective Exchange Rate (REER) of the dirham against the European currencies (the EU15), over the period 1960–2000. We measure the volatility using standard deviation, and the misalignments as the difference between the actual REER and the equilibrium REER...