Non-Parametric Cointegration Analysis of ASEAN-5 Real Exchange Rates
This study employs the Bierens's (1997) non-parametric cointegration methodology to test the Purchasing Power Parity (PPP) hypothesis forfiz~e major ASEAN economies - Indonesia, Malaysia, the Philippines, Singapore and Thailand, with the U.S. and Japan data as base countries. The results provid...
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| Format: | Article |
| Language: | English |
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UUM Press
2004-06-01
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| Series: | International Journal of Management Studies |
| Subjects: | |
| Online Access: | https://e-journal.uum.edu.my/index.php/ijms/article/view/9159 |
| _version_ | 1797943127698309120 |
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| author | Kian-Ping Lim Hock-Ann Lee |
| author_facet | Kian-Ping Lim Hock-Ann Lee |
| author_sort | Kian-Ping Lim |
| collection | DOAJ |
| description | This study employs the Bierens's (1997) non-parametric cointegration methodology to test the Purchasing Power Parity (PPP) hypothesis forfiz~e major ASEAN economies - Indonesia, Malaysia, the Philippines, Singapore and Thailand, with the U.S. and Japan data as base countries. The results provide evidence of mean reversion in dollar denominated real exchange rate for three ASEAN countries - Malaysia, Singapore and Thailand. These findings are in sharp contrast with those earlier studies using Johansen cointegration technique. Consistent with the interpretation of Coakley and Fuertes (2001), the discrepancy between the findings from both approaches is interpreted as a consequence of significant non-linearity in the real exchange rate adjustment to PPP. Further analysis reveals that the evidence of PPP is much stronger with the Japanese yen as the numeraire currency, thus supporting the notion that the choice of numeraire currency can and does matter for testing PPP hypothesis. These results provide strong evidence of the integration between the Japanese economy and those of ASEAN countries, which are closely linked in geographical, economic and trade terms. The increasing role of Japanese yen in the ASEAN region can be taken as providing empirical support for the formation of a yen dominated ASEAN exchange rate system, or a 'yen bloc'.
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| first_indexed | 2024-04-10T20:19:24Z |
| format | Article |
| id | doaj.art-eb4c2fd36f2e4eccae6341df916398a7 |
| institution | Directory Open Access Journal |
| issn | 2232-1608 2180-2467 |
| language | English |
| last_indexed | 2024-04-10T20:19:24Z |
| publishDate | 2004-06-01 |
| publisher | UUM Press |
| record_format | Article |
| series | International Journal of Management Studies |
| spelling | doaj.art-eb4c2fd36f2e4eccae6341df916398a72023-01-26T03:15:32ZengUUM PressInternational Journal of Management Studies2232-16082180-24672004-06-01111Non-Parametric Cointegration Analysis of ASEAN-5 Real Exchange RatesKian-Ping Lim0Hock-Ann Lee1Labuan School of International Business and Finance Universiti Malaysia SabahLabuan School of International Business and Finance Universiti Malaysia SabahThis study employs the Bierens's (1997) non-parametric cointegration methodology to test the Purchasing Power Parity (PPP) hypothesis forfiz~e major ASEAN economies - Indonesia, Malaysia, the Philippines, Singapore and Thailand, with the U.S. and Japan data as base countries. The results provide evidence of mean reversion in dollar denominated real exchange rate for three ASEAN countries - Malaysia, Singapore and Thailand. These findings are in sharp contrast with those earlier studies using Johansen cointegration technique. Consistent with the interpretation of Coakley and Fuertes (2001), the discrepancy between the findings from both approaches is interpreted as a consequence of significant non-linearity in the real exchange rate adjustment to PPP. Further analysis reveals that the evidence of PPP is much stronger with the Japanese yen as the numeraire currency, thus supporting the notion that the choice of numeraire currency can and does matter for testing PPP hypothesis. These results provide strong evidence of the integration between the Japanese economy and those of ASEAN countries, which are closely linked in geographical, economic and trade terms. The increasing role of Japanese yen in the ASEAN region can be taken as providing empirical support for the formation of a yen dominated ASEAN exchange rate system, or a 'yen bloc'. https://e-journal.uum.edu.my/index.php/ijms/article/view/9159Non-parametric cointegrationPurchasing power parityASEAN economiesNon-linearityEasyReg |
| spellingShingle | Kian-Ping Lim Hock-Ann Lee Non-Parametric Cointegration Analysis of ASEAN-5 Real Exchange Rates International Journal of Management Studies Non-parametric cointegration Purchasing power parity ASEAN economies Non-linearity EasyReg |
| title | Non-Parametric Cointegration Analysis of ASEAN-5 Real Exchange Rates |
| title_full | Non-Parametric Cointegration Analysis of ASEAN-5 Real Exchange Rates |
| title_fullStr | Non-Parametric Cointegration Analysis of ASEAN-5 Real Exchange Rates |
| title_full_unstemmed | Non-Parametric Cointegration Analysis of ASEAN-5 Real Exchange Rates |
| title_short | Non-Parametric Cointegration Analysis of ASEAN-5 Real Exchange Rates |
| title_sort | non parametric cointegration analysis of asean 5 real exchange rates |
| topic | Non-parametric cointegration Purchasing power parity ASEAN economies Non-linearity EasyReg |
| url | https://e-journal.uum.edu.my/index.php/ijms/article/view/9159 |
| work_keys_str_mv | AT kianpinglim nonparametriccointegrationanalysisofasean5realexchangerates AT hockannlee nonparametriccointegrationanalysisofasean5realexchangerates |