Long Memory and Parity Reversion in Real Exchange Rate

Pengarang

  • Abd. Ghafar Ismail Faculty of Economics, Universiti Kebangsaan Malaysia, Malaysia
  • Wahi Ismail Faculty of Economics Universiti Teknologi Mara, Malaysia

DOI:

https://doi.org/10.32890/mmj2003.7.2.6

Kata kunci:

purchasing power parity, exchange rate, mean reversion, stationary tests

Abstrak

This paper examines the post Bretton Woods experience of the Malaysian Ringgit. In this period, Malaysia moved from a managed to a floating exchange rate environment.We examine persistence in real exchange rates by estimating fractionally integrated ARIMA models and find evidence of long memory, which induces persistence though this long memory need not be associated with a unit root. The results show that three out of four exchange rates being examined display mean reversion. The long memory process re-establishes the Purchasing Power Parity as a meaningful concept of long-run equilibrium relation between the exchange rate and relative prices.

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Rujukan

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Diterbitkan

2003-12-01

Terbitan

Jil. 7 No. 2 (2003): Malaysian Management Journal (MMJ) Vol. 7 No. 2 December 2003

Bahagian

Articles

Cara Memetik

Ismail, A. G., & Ismail, W. (2003). Long Memory and Parity Reversion in Real Exchange Rate. Malaysian Management Journal, 7(2), 59-65. https://doi.org/10.32890/mmj2003.7.2.6

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