Is the Exchange Rate of Bangladesh Mean Reverting? A Panel Unit Root Approach

Murad, S. M. Woahid

doi:10.18488/journal.aefr/2016.6.2/102.2.100.108

Cited by 4 publications

(1 citation statement)

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“…For instance, Fleissig and Strauss (2000), Engel (2000), Wu and Wu (2001), and Sarno and Taylor (2002) found that real exchange rates follow a stationary process. Murad (2016) used first-generation and second-generation panel unit root tests and found that the exchange rate of the Bangladeshi taka is mean-reverting. Banerjee (1999), Baltagi and Kao (2000), and Pedroni (2000Pedroni ( , 2001 advocated the panel cointegration framework to draw econometrically rigorous conclusions.…”

Section: Introductionmentioning

confidence: 99%

The ASEAN experience of the purchasing power parity theory

Murad

Hossain

2018

Financ Innov

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We used panel data analysis to evaluate the relative purchasing power parity (PPP) hypothesis of the ten ASEAN member countries between 1973 and 2015. We incorporated the cross-sectionally augmented panel unit root test as proposed by Pesaran (J Appl Econ 22:265-312, 2007). For panel cointegration analysis, we employed the four error-correction-based Westerlund (Oxf Bull Econ Stat 69:709-748, 2007) panel cointegration tests. The Westerlund (Oxf Bull Econ Stat 69:709-748, 2007) tests are general enough to permit a large degree of heterogeneity, both in the long-run cointegrating relationship and in the short-run dynamics, and dependence within as well as across the cross-sectional units. To check the robustness of the results, we further estimated the cointegration test excluding Indonesia and Brunei. The findings support our initial results. Further, all the results overwhelmingly support the relative PPP hypothesis. Consequently, the monetary authority would be able to implement a self-regulating monetary policy. It would also be able to control the exchange rates.

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Section: Introductionmentioning

confidence: 99%

The ASEAN experience of the purchasing power parity theory

Murad

Hossain

2018

Financ Innov

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B: Financial Instruments and Markets

2016

World Banking Abstracts

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Changes in Exchange Rate Regimes and Some Macro Factors: Their Impacts on the Valuation of Bangladeshi Taka

Goswami

Rahman

Barai

2022

FIIB Business Review

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Bangladesh, an emerging economy in South Asia, has gone through several regimes of exchange rate systems in the course of its 50 years of independence. A broad-based study to determine the exchange rate of the Bangladeshi taka (BDT) is missing in the existing literature. Using the annual data from 1972–1973 to 2017–2018, the study has measured the changes in exchange rates of BDT during three regimes: a fixed exchange rate, a semi-fixed system and a purely floating system or managed floating system that Bangladesh has followed in successive order. It has also described the factors that need to be affected by any change in the exchange rate. By using a desk research method, this article has investigated the roles of several macroeconomic variables such as the currency denomination of foreign exchange rate reserve components, money supply components, return on financial instruments or interest rates, gross domestic product, trade policy, asset holding strategy and interbank intervention strategy in BDT’s exchange rate fluctuations during those regimes. Among others, we found that Bangladesh’s volume of US dollars (USD) as a foreign reserve significantly outruns the sum of all other currencies and assets combined. However, an extreme dependency on USD might expose BDT to ‘currency risk’, which may be avoided by adopting a better nominal anchor and including some other major currencies in its basket.

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Is the Exchange Rate of Bangladesh Mean Reverting? A Panel Unit Root Approach

Abstract: ABSTRACT

Cited by 4 publications

References 20 publications

The ASEAN experience of the purchasing power parity theory

The ASEAN experience of the purchasing power parity theory

B: Financial Instruments and Markets

Changes in Exchange Rate Regimes and Some Macro Factors: Their Impacts on the Valuation of Bangladeshi Taka

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