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Duc Hong Vo and Anh The Vo
''Currency evaluation using a big mac index for Thailand – lessons for Vietnam''
( 2017, Vol. 37 No.2 )
The study is conducted to evaluate Thailand's currency using both Consumer Price Index (CPI) and Big Mac Index (BMI) over the period of 1980-2013. The measurement of long-run equilibrium exchange rate is based on the purchasing power parity (PPP) using panel unit root test, panel co-integration test, and the fully modified ordinary least squares method. Empirical results from this study confirm a solid validity of PPP for CPI-based exchange rate and a weak evidence for BMI-based exchange rate. As for Thailand's currency evaluation, the result illustrates that (i) the CPI-based exchange rate provides a relatively consistent result with BMI-based exchange rate, with the exception of the 1997 Asian financial crisis and that (ii) the BMI-based exchange rate is more superior when bilaterally being evaluated between Thai Baht and US Dollar. Some lessons can be drawn for policy for both Thailand and Vietnam.
Keywords: Exchange Rate, Currency Evaluation, Purchasing Power Parity, Big Mac Parity, Panel Cointegration Test, Fully Modified Ordinary Least Square (FMOLS)
JEL: E3 - Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data)
F3 - International Finance: General
Manuscript Received : Mar 15 2017 Manuscript Accepted : May 05 2017

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