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Measuring Misalignment Between East Asian and the United States Through Purchasing Power Parity

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Beyond Traditional Probabilistic Methods in Economics (ECONVN 2019)

Part of the book series: Studies in Computational Intelligence ((SCI,volume 809))

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Abstract

The aim of this research is to measure the misalignment between East Asian countries and the United States using Dynamic Ordinary Least Square through Purchasing Power Parity (PPP) approach. Unit root test, Johansen Co-integraion test, Vector Error Correction Model are employed to investigate the relationship of PPP between these countries. The results indicate that only four countries namely, Vietnam, Indonesia, Malaysia and Singapore, have the existence of purchasing power parity with the United States. The exchange rate residual implies that the fluctuation of misalignment depends on the exchange rate regime such as in Singapore. In addition, it indicates that all domestic currencies experience a downward trend and are overvalued before the financial crisis. After this period, all currencies fluctuate. Currently, only Indonesian currency is undervalued in comparison to USD.

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Notes

  1. 1.

    i represents for the countries: Vietnam, Thailand, Singapore, Philippine, Malaysia, Korea, Indonesia and Hongkong.

  2. 2.

    All variables are conducted with intercept except Indonesia in ADF test.

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Author information

Authors and Affiliations

  1. Faculty of Economics, Van Hien University, Ho Chi Minh City, Vietnam

    Cuong K. Q. Tran & An H. Pham

  2. HCM City Open University, Ho Chi Minh City, Vietnam

    Loan K. T. Vo

Authors
  1. Cuong K. Q. Tran
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  2. An H. Pham
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  3. Loan K. T. Vo
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Correspondence to Cuong K. Q. Tran .

Editor information

Editors and Affiliations

  1. Department of Computer Science, University of Texas at El Paso, El Paso, TX, USA

    Vladik Kreinovich

  2. Banking University HCMC, Ho Chi Minh City, Vietnam

    Nguyen Ngoc Thach

  3. Banking University HCMC, Ho Chi Minh City, Vietnam

    Nguyen Duc Trung

  4. TTC Group, Ho Chi Minh City, Vietnam

    Dang Van Thanh

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Tran, C.K.Q., Pham, A.H., Vo, L.K.T. (2019). Measuring Misalignment Between East Asian and the United States Through Purchasing Power Parity. In: Kreinovich, V., Thach, N., Trung, N., Van Thanh, D. (eds) Beyond Traditional Probabilistic Methods in Economics. ECONVN 2019. Studies in Computational Intelligence, vol 809. Springer, Cham. https://doi.org/10.1007/978-3-030-04200-4_29

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