Capital‐enhanced Equilibrium Exchange Rate in the Presence of Structural Breaks: Evidence From the Visegrad Countries*

Koukouritakis, Minoas

doi:10.1111/j.1467-9957.2011.02258.x

Cited by 7 publications

(12 citation statements)

References 25 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…The CHEER approach is invalidated; however, non-rejection of the weak-form of CHEER implies some plausible economic relationships among exchange rates, prices and interest rates. Our results are consistent with the previous literature in Koukouritakis (2013) and Giannellis and Koukouritakis (2013).…”

Section: Introductionsupporting

confidence: 94%

“…Our empirical findings conclude: The exchange rates in BRICS economies are significantly affected by capital flows. The PPP and UIP condition, when formulated alone, do not explain the exchange rate in BRICS economies. The CHEER approach is invalidated; however, non-rejection of the weak-form of CHEER implies some plausible economic relationships among exchange rates, prices and interest rates. Our results are consistent with the previous literature in Koukouritakis (2013) and Giannellis and Koukouritakis (2013). Our robustness test results, based on the data frequency-dependency, show that higher frequency data improve the results as it provides more information about the cointegration relationships. …”

Section: Introductionsupporting

confidence: 91%

“…Although scanty, most of the studies conducted focused mainly on the developed countries (see, inter alia , Juselius, 1991; Johansen and Juselius, 1992; Caporale et al , 2001; Juselius and MacDonald, 2003, 2004; Giannellis and Koukouritakis, 2017). However, after the outbreak of the crisis in 2008, few studies were conducted in case of EMEs (see, inter alia , Ozmen and Gokcan, 2004; Rashid, 2009; Keblowski and Welfe, 2010, 2012; Ozimkovska and Kubielas, 2013; Koukouritakis, 2013; Giannellis and Koukouritakis, 2013; Prabheesh and Garg, 2018; Grabowski and Welfe, 2019).…”

Section: Brief Review Of Literaturementioning

confidence: 99%

“…We use the CHEER approach for several reasons. First, unlike other equilibrium exchange rate approaches[2], the CHEER approach does not require a plethora of data, which may be a constraint in the case of many EMEs (Koukouritakis, 2013). Second, it considers the effect of both current account (CA) and capital account (KA) transactions on exchange rates.…”

Section: Introductionmentioning

confidence: 99%

See 3 more Smart Citations

Testing deviations from PPP and UIP: evidence from BRICS economies

Prabheesh

Garg²

2020

SEF

View full text Add to dashboard Cite

Purpose This paper aims to investigate the interrelations between purchasing power parity (PPP) and uncovered interest parity (UIP) in BRICS economies, namely, Brazil, Russia, India, China and South Africa, by checking the validity of the capital-enhanced equilibrium exchange rate (CHEER) approach. Further, this study tests whether the CHEER results are data frequency-dependent. Design/methodology/approach The present study uses monthly data ranging from 1997M01 to 2016M12 and considers the US economy as the representative foreign country. The study uses structural break unit root test and structural break cointegration technique to test the presence of economic relationships between nominal exchange rates and each of the price and interest rate differentials. Then, the study examines the validity of the CHEER approach by testing the appropriate theoretical restrictions. Findings The cointegration results suggest the existence of two cointegrating vectors representing UIP and PPP conditions. For all countries, the data appear to support the hypothesis that the system contains UIP and PPP relations. However, each of the international parity hypotheses is strongly rejected when formulated in isolation and jointly, leading to repudiation of the CHEER validity. Further, it is found that the results are data frequency-dependent and suggest that higher frequencies should be used as they provide additional information. Originality/value First, the literature on equilibrium exchange rates in BRICS economies is scanty. BRICS economies are large-emerging economies and one of the fastest growing economies and thus entail an empirical enquiry on their exchange rates. Second, the empirical application has mainly used monthly data to test the validity of the CHEER approach. However, data frequencies could affect the results. To the best of the authors’ knowledge, this study is the first to check data frequency-dependency in examination of the CHEER approach.

show abstract

Section: Introductionsupporting

confidence: 94%

Section: Introductionsupporting

confidence: 91%

Section: Brief Review Of Literaturementioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Testing deviations from PPP and UIP: evidence from BRICS economies

Prabheesh

Garg²

2020

SEF

View full text Add to dashboard Cite

show abstract

“…For positive results, see [5], [6], [7], etc. For the negative results, see [8], [9], [10] [11], and [12], etc. Here it is important to note that when both PPP and UIP fail, it becomes possible to find evidence of supporting CHEER.…”

Section: Introductionmentioning

confidence: 99%

Longer Data, Less “CHEER”—Case Study of Yen-Dollar Exchange Rate

Zhao¹,

Guo²,

Ye³

2019

View full text Add to dashboard Cite

This paper compares CHEER approach in both short-run (since 1973) and long-run (since 1870) with the yen-dollar exchange rate. The most important result is that CHEER is valid only in the period when the international capital market is developed enough. Historical data will render the interest rate parity insignificant and thus CHEER will fail. Also, the paper demonstrates that when either PPP or UIP fails, modification of the cointegration variables improves the power of the CHEER test.

show abstract