Sticky prices and time to equilibrium: Evidence from Asia-Pacific trade-related economies

Catherine S F Ho, M. Ariff

Research output: Contribution to journalArticleResearchpeer-review

2 Citations (Scopus)

Abstract

The theoretical relation between exchange rate and prices has been a difficult proposition to find supporting evidence despite many studies of developed economies using standard research methods. The exchange rate to price relation appears to hold in the long run only, a result consistent with sticky price hypothesis. There is a need to add to this sticky price literature by examining more yet-studied economies to this area of research. This article presents results to support long-run equilibrium in the Asia-Pacific economies as being 5 years. The methodology is used to group countries with high-trade intensity within a region and value-weight the resulting variables to test the theory in a regional context. Our positive finding on the long-run equilibrium, we believe, helps in some ways to enrich the literature on the exchange rate behaviour of an important region for world trade.

Original languageEnglish
Pages (from-to)2851-2861
Number of pages11
JournalApplied Economics
Volume43
Issue number21
DOIs
Publication statusPublished - Aug 2011

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