Exchange rate misalignment and inflation rate persistence: Evidence from Latin American countries

Giannellis, Nikolaos; Koukouritakis, Minoas

doi:10.1016/j.iref.2012.07.013

Cited by 24 publications

(16 citation statements)

References 44 publications

(36 reference statements)

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“…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%

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Testing deviations from PPP and UIP: evidence from BRICS economies

Prabheesh

Garg²

2020

SEF

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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.

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Section: Introductionsupporting

confidence: 94%

Section: Introductionsupporting

confidence: 91%

Testing deviations from PPP and UIP: evidence from BRICS economies

Prabheesh

Garg²

2020

SEF

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“…Recently, [21] have integrated this rate in their model to determine the misalignments of the exchange rate and to study the persistence of inflation for the countries of Latin America.…”

Section: The Rate Of Coverage (Tc)mentioning

confidence: 99%

Subprime Mortgage Crisis and the Exchange Rate Channel: Evidence from Six Countries of the Zone Euro-Med

Hachicha¹,

Hachicha²

2017

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This article proposes to assess the impact of the subprime mortgage crisis on the exchange rate channel in 6 countries of the Euro-Med zone. To do this, our analysis is based on three evaluation methods that allow us to conclude that the exchange rate channel is better evaluated by the non-linear approach of the countries studied. Thus, the depreciation of the exchange rate adopted by the countries of the Med zone did worse macroeconomic stability and economic convergence.

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“…The result reveals that this simple modification is not trivial: cointegration among prices, interest rates and the exchange rate would not exist without adding expectations. For positive results, see [5], [6], [7], etc. For the negative results, see [8], [9], [10] [11], and [12], etc.…”

Section: Introductionmentioning

confidence: 99%

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

Zhao¹,

Guo²,

Ye³

2019

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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.

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Exchange rate misalignment and inflation rate persistence: Evidence from Latin American countries

Cited by 24 publications

References 44 publications

Testing deviations from PPP and UIP: evidence from BRICS economies

Testing deviations from PPP and UIP: evidence from BRICS economies

Subprime Mortgage Crisis and the Exchange Rate Channel: Evidence from Six Countries of the Zone Euro-Med

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

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