A re-examination of the exchange rate overshooting hypothesis: Evidence from Zambia

Chiliba, L; Alagidede, Paul; Schaling, Eric

doi:10.25159/1998-8125/6060

Cited by 4 publications

(5 citation statements)

References 49 publications

(52 reference statements)

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“…Because unit root tests have varying degrees of power, they provide alternative findings, particularly for macroeconomic variables (Chiliba, Alagidede, &Schaling, 2016). As a result, a battery of unit root tests is employed, namely the Augmented Dickey-Fuller (Gujarati and Porter, 2005), Phillips and Perron (PP) (1988), to ascertain the order of integration of various series in the hope of obtaining mutually reinforcing results that will improve the data's efficiency and consistency (Marketa, A. and Darina, 2016).…”

Section: Empirical Findings/ Resultsmentioning

confidence: 99%

The relationship between unemployment and economic growth: is Okun's Law valid for the Jordan case?

Alkasasbeh

2022

IJEDR

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The purpose of this paper is the validity of Okun’s Law for Jordan’s economy over the period 1990 to 2020. The relation between unemployment and economic growth was tested. It aims to analyze the impact of unemployment on economic growth and to propose recommendations for enhancing economic growth and reducing unemployment in Jordan since the Jordanian economic growth was slow before the Covid-19 outbreaks. The research employed ARDL Bound Cointegration method having validated it’s appropriateness withDickey-Fuller and Philips-Perron tests. The empirical results reveal the existence of Okun’s law in the Jordan economy, with a 1% decrease in Gross Domestic Product which is correlated with a 0.276% increase in the unemployment rate. Based on these empirical outcomes, several policy recommendations are formulated to increase the attraction of foreign direct investment (FDI)which is needed to minimize the country's high unemployment rate. Jordan's policymakers are urged to embrace both labor and growth-inducing measures.

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Section: Empirical Findings/ Resultsmentioning

confidence: 99%

The relationship between unemployment and economic growth: is Okun's Law valid for the Jordan case?

Alkasasbeh

2022

IJEDR

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“…The Effect of Money Supply on Exchange Rate in ASEAN-5: Empirical Test of Dornbusch Overshooting Model concept. Chiliba et al (2019) retested the overshooting hypothesis using the ARDL procedure on the United States Dollar/Zambian Kwacha (USD/ZMK) exchange rate. The research results show no evidence of an overshooting phenomenon with no long-term relationship between the exchange rate and macroeconomic variables.…”

Section: Empirical Frameworkmentioning

confidence: 99%

The Effect of Money Supply on Exchange Rate in ASEAN-5: Empirical Test of Dornbusch Overshooting Model

Maghfiroh,

Jayadi

2024

JIETcon

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The primary purpose of this study is to analyze the effects of the money supply on exchange rates in ASEAN-5 and whether there is an exchange rate overshooting phenomenon with the application of the Dornbusch Overshooting Model. This study uses the Autoregressive Distributed-Lag (ARDL) method to analyze the short and long-term effects and uses time series data from 1980 to 2021 in ASEAN-5. The results of this study are still ambiguous in finding the overshooting phenomenon in ASEAN-5. In the short term, the research results support overshooting in two countries, Malaysia and Thailand. However, in the long term, no positive and significant influence was found between the money supply gap and exchange rate misalignment in ASEAN-5. Besides that, the inflation gap, interest rate gap, and output gap also greatly influence changes in exchange rate misalignment and have different significant effects in the short and long term.

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“…Finally, the third category of the literature finds no support for the overshooting hypothesis. For instance, Chiliba et al (2016) examine the topic over the period January 2000 to December 2012 by taking the US dollar/Zambian kwacha exchange rate. Based on the cointegration approach, the researchers report no evidence of exchange rate overshooting.…”

Section: Literature Reviewmentioning

confidence: 99%

“…In other studies, some unexpected findings may be owing to the wealth effect (Taylor, 1995). While Chiliba et al (2016) report no empirical evidence of the overshooting hypothesis. On the other hand, Haq and Adil (2014) report the presence of exchange rate under-shooting.…”

Section: Introductionmentioning

confidence: 98%

“…However, commodity prices surge, real money supply declines, interest rates rise and the currency appreciate in the long run. Dornbusch's (1976) model explains exchange rate fluctuations and elucidates the deviation of purchasing power parity in the short-run (Güneş and Karul, 2016) and guides the conduct of monetary policy (Chiliba et al , 2016). This brings some optimism as the exchange rate has been difficult to predict in extant economic theory (Aftab et al , 2020; Meese and Rogoff, 1983) [1].…”

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Does the exchange rate overshoot in an emerging economy?

Aftab

Rafique

Lau

2021

JCEFTS

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Purpose The sticky-price monetary model of exchange rate states the overshooting hypothesis as, exchange rate depreciation beyond its long-term value in response to an increase in money supply owing to the sticky nature of prices. Because of interest and relevance to policy, there is a huge extant literature on it but with mixed findings that suggest the need for further studies to refine the findings. Pakistan’s rupee exchange rate against the US dollar depreciated 128.44% over the period May 2007–December 2018. Considering this substantial decline in rupee's value, this study aims to examine either the rupee short-run value is over-shot of its long-term value. Design/methodology/approach This study uses a linear ARDL approach that segregates the short-run and long-run effects thus clarifying the premise of exchange rate overshooting. Furthermore, this study also uses nonlinear ARDL as a robustness check incorporating structural breaks. Findings Findings based on a linear model show evidence of exchange rate undershooting that means a positive money shock causes the exchange rate to appreciate. A nonlinear analysis also provides support to these findings. However, the increase in relative money supply has more such effect than that of a decrease in the relative money supply. Moreover, the authorities’ inclination to stabilize the exchange rate appreciates its short-run value. Originality/value This study substantiates the overshooting hypothesis literature by considering the role of asymmetric effects of exchange rate determinants and structural breaks that is a rare attempt in the extant literature.

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A re-examination of the exchange rate overshooting hypothesis: Evidence from Zambia

Cited by 4 publications

References 49 publications

The relationship between unemployment and economic growth: is Okun's Law valid for the Jordan case?

The relationship between unemployment and economic growth: is Okun's Law valid for the Jordan case?

The Effect of Money Supply on Exchange Rate in ASEAN-5: Empirical Test of Dornbusch Overshooting Model

Does the exchange rate overshoot in an emerging economy?

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