What Determines Real Exchange Rates? Evidence from Asia
Journal Title: Saudi Journal of Business and Management Studies - Year 2017, Vol 2, Issue 11
Abstract
Abstract:This study examines the macroeconomic factors which are affecting to real effective exchange rates (REER) from selected ten countries in Asia. Two panel regression approaches namely fully modified ordinary least squares (FMOLS), dynamic ordinary least squares (DOLS) and fixed effects are applied using panel data over the period 2002–2016. Empirical results show that presence of a significant long-term association amongst the REER and seven macroeconomic determents namely interest rate, inflation, trade balance, terms of trade, trade openness, foreign reserves and share price index and their significance are remaining same in all models applied. However, trade balance has a positive connection with the REER while other significant variables have a negative association with the REER in long run. Moreover, the money supply (M2) and real gross domestic production (GDP) do not show a significant relationship with the REER. Keywords:Asia, DOLS, Macroeconomic Fundamentals, FMOLS, Long run, REER JEL Classifications: F31, F41, C33
Authors and Affiliations
DileshaNawadali Rathnayake, Gang Sun, NingDing
Keywords
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