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Title: Extended generalized purchasing power parity and optimum currency area in East Asian countries
Authors: Rangkakulnuwat, P. 
Ahn, S.K. 
Wang, H. Holly 
He, S. 
Issue Date: 2010
Publisher: Scopus
University of the Thai Chamber of Commerce
Source: P. Rangkakulnuwat, S.K. Ahn, H. Holly Wang, S. He (2010) Extended generalized purchasing power parity and optimum currency area in East Asian countries. Applied Economics Vol.42 No.4, 497-513.
Abstract: This article extends the theory of generalized purchasing power parity (GPPP) by developing a model including foreign variables such as the real money supply, output and interest rate. A cointegration rank test with two structural breaks in the deterministic trend was adopted to selected Asian countries, with Japan as the base country. There were two cointegrating vectors and six common stochastic trends in the model. The cointegrating vectors were estimated by the same approach used byPesaran et al. (2000). The first cointegrating vector is interpreted as GPPP, and the second one is interpreted as the extended GPPP. According to GPPP, these countries could form a single currency area. The first stochastic trend is primarily driven by Japan's real money supply; the second, third and fourth by the real exchange rates of the Philippines, Singapore and Thailand, respectively; the fifth by Japan's output; and the sixth by Japan's government bond yields.
Rights: This work is protected by copyright. Reproduction or distribution of the work in any format is prohibited without written permission of the copyright owner.
Appears in Collections:RSO: Journal Articles

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