Do China Mainland and SARs Constitute an Optimal Currency Area? Evidence from Nonlinearity and Stationarity Behavior Testing on Real Exchange Rates

doi:10.1007/s12204-016-1729-9

上海交通大学学报（英文版） ›› 2016, Vol. 21 ›› Issue (3): 328-334.doi: 10.1007/s12204-016-1729-9

Do China Mainland and SARs Constitute an Optimal Currency Area? Evidence from Nonlinearity and Stationarity Behavior Testing on Real Exchange Rates

ZHENG Xiaoya1*(郑晓亚), YOU Haibo2 (尤海波)

(1. Post-Doctoral Research Station, Shanghai University of Finance and Economics, Shanghai 200433, China; 2. Post-Doctoral Workstation, Xiamen International Bank, Xiamen 361001, Fujian, China)

出版日期:2016-06-30 发布日期:2016-06-30
通讯作者: ZHENG Xiaoya(郑晓亚) E-mail:978983644@qq.com

Do China Mainland and SARs Constitute an Optimal Currency Area? Evidence from Nonlinearity and Stationarity Behavior Testing on Real Exchange Rates

ZHENG Xiaoya1*(郑晓亚), YOU Haibo2 (尤海波)

(1. Post-Doctoral Research Station, Shanghai University of Finance and Economics, Shanghai 200433, China; 2. Post-Doctoral Workstation, Xiamen International Bank, Xiamen 361001, Fujian, China)

Online:2016-06-30 Published:2016-06-30
Contact: ZHENG Xiaoya(郑晓亚) E-mail:978983644@qq.com

摘要/Abstract

摘要： In this article, we use the unrestricted two-regime autoregressive threshold model to test both nonlinearity and stationarity of China’s real exchange rate against its Hong Kong and Macau special administrative regions (SARs). Our main finding is that China’s real exchange rate is neither linear nor stationary, indicating that the purchasing power parity does not hold between China Mainland and its two SARs, which implies, to certain extent, the three economies may not meet the condition of constituting an optimal currency area.

关键词: optimal currency area, real exchange rate, purchasing power parity, threshold auto-regression model, nonlinearity unit root test

Abstract: In this article, we use the unrestricted two-regime autoregressive threshold model to test both nonlinearity and stationarity of China’s real exchange rate against its Hong Kong and Macau special administrative regions (SARs). Our main finding is that China’s real exchange rate is neither linear nor stationary, indicating that the purchasing power parity does not hold between China Mainland and its two SARs, which implies, to certain extent, the three economies may not meet the condition of constituting an optimal currency area.

Key words: optimal currency area, real exchange rate, purchasing power parity, threshold auto-regression model, nonlinearity unit root test

中图分类号:

F 831

ZHENG Xiaoya1*(郑晓亚), YOU Haibo2 (尤海波). Do China Mainland and SARs Constitute an Optimal Currency Area? Evidence from Nonlinearity and Stationarity Behavior Testing on Real Exchange Rates[J]. 上海交通大学学报（英文版）, 2016, 21(3): 328-334.

ZHENG Xiaoya1*(郑晓亚), YOU Haibo2 (尤海波). Do China Mainland and SARs Constitute an Optimal Currency Area? Evidence from Nonlinearity and Stationarity Behavior Testing on Real Exchange Rates[J]. Journal of shanghai Jiaotong University (Science), 2016, 21(3): 328-334.

参考文献 7

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[3]	TAYLORM P, PEEL D A, SARNO L. Nonlinear meanreversion in real exchange rates: Towards a solution tothe purchasing power parity puzzles [J]. InternationalEconomic Review, 2001, 42(4): 1015-1042.
[4]	CHORTAREAS G, KAPETANIOS G. The yen realexchange rate may be stationary after all: Evidencefrom nonlinear unit root tests [J]. Oxford Bulletin ofEconomics and Statistics, 2004, 66(1): 113-131.
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Do China Mainland and SARs Constitute an Optimal Currency Area? Evidence from Nonlinearity and Stationarity Behavior Testing on Real Exchange Rates

Do China Mainland and SARs Constitute an Optimal Currency Area? Evidence from Nonlinearity and Stationarity Behavior Testing on Real Exchange Rates

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