Capital-enhanced equilibrium exchange rate: evidence from India

This article examines the validity of the capital-enhanced equilibrium exchange rate (CHEER) approach using quarterly data ranging from 1993Q1 to 2016Q2. Using unit root break test and structural break cointegration technique,  our overall results indicated that the CHEER is invalidated once a struc...

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Published in:Applied economics letters 2018-11, Vol.25 (19), p.1393-1397
Main Authors: Prabheesh, K. P., Garg, Bhavesh
Format: Article
Language:English
Subjects:
Capital movement
cointegration
Cointegration analysis
Economic models
Economic theory
Economics
Equilibrium
exchange rate
Foreign exchange rates
interest rate differentials
Purchasing power parity
structural breaks
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description This article examines the validity of the capital-enhanced equilibrium exchange rate (CHEER) approach using quarterly data ranging from 1993Q1 to 2016Q2. Using unit root break test and structural break cointegration technique,  our overall results indicated that the CHEER is invalidated once a structural break is accounted for in the cointegration relationship. The rejection of the validity could be attributed to the asymmetry in the capital flows and exchange rates being not fully flexible.
doi_str_mv 10.1080/13504851.2017.1422592
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source International Bibliography of the Social Sciences (IBSS); Business Source Ultimate【Trial: -2024/12/31】【Remote access available】; EconLit with Full Text【Remote access available】; Taylor and Francis Social Sciences and Humanities Collection
subjects Capital movement
cointegration
Cointegration analysis
Economic models
Economic theory
Economics
Equilibrium
exchange rate
Foreign exchange rates
interest rate differentials
Purchasing power parity
structural breaks
title Capital-enhanced equilibrium exchange rate: evidence from India
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