NONLINEAR ADJUSTMENT OF REAL EXCHANGE RATES TOWARDS PURCHASING POWER PARITY AND THE ASIAN FINANCIAL CRISIS From: International Journal of Business and Society | Date: January 1, 2005| Author: Liew, Khim-Sen; Baharumshah, Ahmad Zubaidi; Lim, Kian-Ping | Copyright Universiti Malaysia Sarawak Jan 2005. Provided by ProQuest LLC.Copyright information

ABSTRACT

This paper investigates the underlying dynamics of the adjustment process of the deviations of two selected ASEAN exchange rates from the long-run equilibrium level as suggested by the well-known purchasing power parity (PPP) hypothesis. To accomplish this task, we estimate the standard linearity test statistics as suggested by Lukkonen, Saikkonen and Terasvirta (1988), which has power against the Exponential Smooth Transition Autoregressive (ESTAR) model. Using quarterly data...