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Title: How to improve bank regulation in Indonesia: an empirical study ofoptimal bank corrective action employing the dynamic contingent claims model
Authors: Hall, Maximilian J.B.
Mustika, Ganjar
Keywords: banking policy
bank closures
deposit insurance
econometrics for finance
risk management
Issue Date: 2004
Abstract: This paper investigates the possibility that long-run relative purchasing power parity is dependent upon the nature of real exchange shocks that are experienced. While existing studies involving developed and less developed countries often find against purchasing power parity having employed linear tests of non-stationarity or non-cointegration, we employ a new cointegration test, recently advocated by Enders and Siklos and Enders and Dibooglu, that tests for an asymmetric adjustment towards parity with respect to positive and negative real exchange rate shocks. Using a sample of ten African economies with data taken from the post-Bretton Woods floating exchange rate era, long-run purchasing power parity holds in eight of these cases if an explicit distinction is made between positive and negative shocks. Across the sample, we find variation in the type of asymmetry experienced and the roles played price and nominal exchange rate adjustment.
Description: Economics Research Paper, no. 04-15
URI: https://dspace.lboro.ac.uk/2134/324
Appears in Collections:Working Papers (Economics)

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