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Nonlinear dependence in exchange rate returns: How do emerging Asian currencies compare with major currencies?
Institution:1. School of Economics and Finance, Curtin Business School, Australia;2. School of Business & Law, Edith Cowan University, Australia;1. School of Business and Governance, Murdoch University, Murdoch, WA, 6150, Australia;2. School of Business and Law, Edith Cowan University, 270 Joondalup Drive, Joondalup, WA, 6027, Australia;1. Ashoka University, New Delhi, India;2. Indian Institute of Management, Kozhikode, India;3. Delhi School of Economics, New Delhi, India;4. Centre for Development Studies, Thiruvananthapuram, India;1. Edith Cowan University, 270 Joondalup Drive, Joondalup, 6027 Western Australia, Australia;2. Business and Economics Research Centre, Ho Chi Minh City Open University, 97 Vo Van Tan Street, District 3, Ho Chi Minh City, Vietnam;1. Northwest Institute for Nonferrous Metal Research, Xi’an, Shaanxi 710016, China;2. School of Engineering, Edith Cowan University, 270 Joondalup Drive, Joondalup, Perth, WA 6027, Australia;1. Beijing University of Posts and Telecommunications, Beijing, China;2. Waseda University, Tokyo, Japan;1. Surface Analysis and Materials Engineering Research Group, School of Engineering and Information Technology, Murdoch University, Perth, WA 6150, Australia;2. College of Ibn-Alhaitham for Pure Science, University of Baghdad, Baghdad, Iraq;3. Chemical and Metallurgical Engineering and Chemistry, School of Engineering and Information Technology, Murdoch University, Perth, WA 6150, Australia;4. Newcastle University, Singapore, SIT Building @Ngee Ann Polytechnic, 537 Clementi Road #06-01, Singapore, 599493, Singapore;5. Department of Chemical Engineering, University of Riau, Pekanbaru, Indonesia;6. School of Engineering, Edith Cowan University, Joondalup, WA 6027, Australia;7. Faculty of Chemistry, Hanoi National University of Education, Building A4, 136 Xuan Thuy Road, Cau Giay Dist., Hanoi, Viet Nam;8. Department of Physics, Jahangirnagar University, Savar, Dhaka, 1342, Bangladesh
Abstract:This paper provides a comparative review of the dynamic characteristics of monthly exchange rate changes for five major currencies relative to those of five emerging Asian economies over the last four decades. Using the British pound sterling as the numeraire currency, the data support nonlinear dependence in exchange rates for the less-liquid Asian currencies, while results for the major currencies are mixed. The more recent data indicate rejection of nonlinear dependence in major currencies.
Keywords:Purchasing power parity  Nonlinear adjustment  Structural change  Outliers
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