TY - JOUR
T1 - Are shocks to real effective exchange rates permanent or transitory? Evidence from Pacific Island countries
AU - Narayan, Paresh Kumar
AU - Prasad, Biman Chand
N1 - Funding Information:
In this study, we consider four Pacific Island economies, namely Papua New Guinea, Fiji, Solomon Islands and Samoa. This sample of countries is dictated by data availability, as data on real effective exchange rates is only available for these four Pacific Island economies. All data on real effective exchange rates are monthly and are extracted from the International Financial Statistics published by the International Monetary Fund. For PNG and Fiji, data are for the period 1979 : 12 to 2003 : 07, for the Solomon Islands data are for the period 1978 : 01 to 2004 : 05 and for Samoa data are for the period 1975 : 02 to 2003 : 08. We convert all data into natural logarithmic form before conducting tests for unit roots.
Copyright:
Copyright 2008 Elsevier B.V., All rights reserved.
PY - 2008/4
Y1 - 2008/4
N2 - In this article, we consider the stability of the real effective exchange rates for four Pacific Island countries using the Lee and Strazicich (2003a, b) unit root test, which allows one to incorporate at most two structural breaks in the data series. Our main finding is that for Papua New Guinea and Samoa, exchange rates are stable, implying that shocks will have a transitory effect on real effective exchange rates, while for Fiji and the Solomon Islands we find exchange rates to be unstable, implying that shocks will have a permanent effect on real effective exchange rates.
AB - In this article, we consider the stability of the real effective exchange rates for four Pacific Island countries using the Lee and Strazicich (2003a, b) unit root test, which allows one to incorporate at most two structural breaks in the data series. Our main finding is that for Papua New Guinea and Samoa, exchange rates are stable, implying that shocks will have a transitory effect on real effective exchange rates, while for Fiji and the Solomon Islands we find exchange rates to be unstable, implying that shocks will have a permanent effect on real effective exchange rates.
UR - http://www.scopus.com/inward/record.url?scp=42149177714&partnerID=8YFLogxK
U2 - 10.1080/00036840600771122
DO - 10.1080/00036840600771122
M3 - Article
AN - SCOPUS:42149177714
SN - 0003-6846
VL - 40
SP - 1053
EP - 1060
JO - Applied Economics
JF - Applied Economics
IS - 8
ER -