Explosive bubbles in the US–China exchange rate? Evidence from right-tailed unit root tests.
Journal article
Authors | Fry, John, Apergis, Nicholas and El Montasser, Ghassen |
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Abstract | In this article we apply novel right-tailed unit root (sup Augmented Dickey-Fuller (SADF) and generalized sup ADF) tests to the China–US exchange rate. The empirical results document that the recent financial crisis in 2008 may be preceded by early warning signs of exuberance. Using the SADF test, evidence of an explosive behavior in the nominal exchange is found from 2005 onwards. This period coincides with both financial reforms in China and early indications of an impending US crisis that both have been reported in the literature. Our findings suggest that such an explosive behavior may be attributable to differences in the relative prices of traded goods. Policy implications are also derived. |
Keywords | rational bubbles; explosive bubbles; exchange rates; US dollar–Chinese yuan exchange rate |
Year | 2016 |
Journal | China Economic Journal |
Publisher | Taylor & Francis |
ISSN | 1753-8963 |
1753-8971 | |
Digital Object Identifier (DOI) | https://doi.org/10.1080/17538963.2015.1125591 |
Web address (URL) | http://hdl.handle.net/10545/623389 |
http://creativecommons.org/licenses/by-nc-nd/4.0/ | |
hdl:10545/623389 | |
Publication dates | 13 Jan 2016 |
Publication process dates | |
Deposited | 26 Jan 2019, 14:29 |
Accepted | 24 Nov 2015 |
Contributors | University of Manouba, Sheffield University and Nortumbria University |
File | File Access Level Open |
File | File Access Level Open |
https://repository.derby.ac.uk/item/92798/explosive-bubbles-in-the-us-china-exchange-rate-evidence-from-right-tailed-unit-root-tests
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