Exchange rate bubbles: Fundamental value estimation and rational expectations test

Maldonado, Wilfredo L.; Tourinho, Octávio Augusto Fontes; Valli, Marcos

doi:10.1016/j.jimonfin.2011.12.009

Cited by 14 publications

(5 citation statements)

References 30 publications

(48 reference statements)

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“…This calculation is done by multiplying the bilateral nominal exchange rate by the ratio of the consumer price index (CPI) in the US to the CPI of each country. In this case, the fundamental price of the asset (currency) is the evolution of the international price ratio, following the purchase power parity theory (see Maldonado et al ., ). We limit our analysis to periods in which exchange rates have freely floated according to Levy‐Yeyati and Sturzenegger's () de‐facto classification (Table ).…”

Section: Datamentioning

confidence: 97%

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Asset Price Bubbles: Existence, Persistence and Migration

Gómez-González

Ojeda-Joya

Franco

et al. 2015

South African J Economics

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Econometric tests are performed for the detection and migration of asset-price bubbles in the housing, currency and stock markets of seven countries. This set of countries includes both developed and emerging economies that have good historical data on housing prices. Our empirical results suggest that this type of exuberant behaviour in prices occurs more frequently in the housing market than in the currency and stock markets. Additionally, we find significant evidence of bubble migration across markets within some of the studied countries. JEL Classification: G01, G12, C22

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Section: Datamentioning

confidence: 97%

“…Maldonado et al . () used the same method and applied it to the Brazilian case, but also failed to detect bubbles in the bilateral exchange rate with the US.…”

Section: Related Studiesmentioning

confidence: 99%

Asset Price Bubbles: Existence, Persistence and Migration

Gómez-González

Ojeda-Joya

Franco

et al. 2015

South African J Economics

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“…Elwood et al (1999) applied state-space models and Monte Carlo experiments to the Japanese and German exchange rate series and did find strong evidence of a deviation from white noise that is consistent with the existence of a stochastic rational bubble which burst between April and May of 1990, when it was a period of considerable turmoil in the Japanese and German financial markets. Maldonado et al (2012) set-up three models to test the significance of speculative bubbles that may have occurred in the period that is considered. The results could not reject the null hypothesis that rational bubbles exist at the 5% significance level.…”

Section: Literature Reviewmentioning

confidence: 99%

Are there bubbles in Chinese RMB–dollar exchange rate? Evidence from generalized sup ADF tests

et al. 2015

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This article uses recently developed generalized sup ADF (GSADF) unit root tests into the analysis of nominal RMB-dollar exchange rates bubbles. Based on the results from the GSADF tests, we find strong evidence of explosive behaviour in the nominal exchange rate and investigate two bubbles there. The first bubble is during 2005-2006 which is determined neither by the relative prices of traded goods nor the relative price of nontraded goods. The second bubble busts in 2008 during subprime crisis period, and which is determined by the relative prices of traded goods but not the relative price of nontraded goods. There is no bubble before 2005 as the exchange rate is under fixed regime. As for this result, some expansionary monetary and fiscal policies are required in China since these are the most efficient and effective under a bubble burst scenario.

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“…Among others, van Norden and Schaller (1993), van Norden and Vigfusson (1998) and Brooks and Katsaris (2005) apply them to stock markets. van Norden (1996) and Maldonado et al (2012) use these models to test for bubbles in exchange rate markets, while Anderson et al (2011) do the same for real estate. And these two models have also been used to test for bubbles in oil prices by Shi and Arora (2012).…”

Section: Introductionmentioning

confidence: 99%