A study of real exchange rates of traded goods using structural error correction models
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The Ohio State University / OhioLINK
2000
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ndltd-OhioLink-oai-etd.ohiolink.edu-osu13184293972021-08-03T06:04:03Z A study of real exchange rates of traded goods using structural error correction models Kim, Jaebeom <p>The main purpose of this dissertation is to investigate the long run behavior of real exchange rates for traded goods' price for a modern period of flexible exchange rate and to estimate the speed of adjustment coefficient in the exchange rate models with sticky prices. The issue of this dissertation is how it would affect the adjustment speed to parity 1) if the traded goods' price is employed when compared with general price and non-traded goods' price, and most importantly 2) if structural error correction models are employed when compared with reduced form models.</p><p>Two kinds of traded and non-traded sector deflators by type and by object, and total consumption deflator are used to construct real exchange rates. Unit roots tests of the real exchange rate using the J(0,3) tests developed by Park and Choi (1988) and the Said-Dickey tests (1984) under the null of nonstationarity, and the G(0,q) tests introduced by Park (1990) under the null of stationarity are employed to investigate the long-run behavior of real exchange rates.To estimate the short run dynamic adjustment coefficient I employ the Structural Error Correction Models proposed by Kim, Ogaki and Yang (1999) in which one variable adjusts gradually to its long-run equilibrium level, with a constant speed of adjustment. First, I perform a single structural ECM approach to a slow adjustment equation. Second, I employ a system method in which Hansen and Sargent's method that applies GMM to linear rational expectation models is combined with our single equation method.</p><p>In the single equation method, I obtain positive estimates for the short run dynamic adjustment coefficient for all countries pairs, implying half-lives of 1.40 to 2.45 years for traded goods rates with the exception of Japan, half-lives of 2.42 to 4.90 years for general goods rates and half-lives of 3.22 to 7.10 years for non-traded goods rates.</p><p>When the system method imposing money market equilibrium condition and uncovered interest parity condition is applied to the exchange rate model, I estimated the speed of adjustment coefficient from both the structural slow adjustment equation for domestic price and from the rational expectations equation for the exchange rate. In most cases, the cross equation restriction that the adjustment speeds of these two rates are equal is not rejected at the five percent level. Furthermore, I obtain the positive estimates for adjustment coefficients, implying half-lives of less than 1 year for most cases of traded goods rates, half-lives of 0.45 to 3.48 for general price rates and half-lives of 1.77 to 17.57 for non-traded goods rates except the UK cases.</p><p>According to these empirical contemplations, the half-life of the PPP deviation for the traded goods rates is shorter than those for the general price rates and for the non-traded goods rates for most of the cases, implying a faster speed of adjustment to parity.</p> 2000 English text The Ohio State University / OhioLINK http://rave.ohiolink.edu/etdc/view?acc_num=osu1318429397 http://rave.ohiolink.edu/etdc/view?acc_num=osu1318429397 unrestricted This thesis or dissertation is protected by copyright: all rights reserved. It may not be copied or redistributed beyond the terms of applicable copyright laws. |
| collection |
NDLTD |
| language |
English |
| sources |
NDLTD |
| author |
Kim, Jaebeom |
| spellingShingle |
Kim, Jaebeom A study of real exchange rates of traded goods using structural error correction models |
| author_facet |
Kim, Jaebeom |
| author_sort |
Kim, Jaebeom |
| title |
A study of real exchange rates of traded goods using structural error correction models |
| title_short |
A study of real exchange rates of traded goods using structural error correction models |
| title_full |
A study of real exchange rates of traded goods using structural error correction models |
| title_fullStr |
A study of real exchange rates of traded goods using structural error correction models |
| title_full_unstemmed |
A study of real exchange rates of traded goods using structural error correction models |
| title_sort |
study of real exchange rates of traded goods using structural error correction models |
| publisher |
The Ohio State University / OhioLINK |
| publishDate |
2000 |
| url |
http://rave.ohiolink.edu/etdc/view?acc_num=osu1318429397 |
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AT kimjaebeom astudyofrealexchangeratesoftradedgoodsusingstructuralerrorcorrectionmodels AT kimjaebeom studyofrealexchangeratesoftradedgoodsusingstructuralerrorcorrectionmodels |
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