Relative Real Income Research Articles

Panel Analysis of Monetary Model of ASEAN-5 Exchange Rates

In this study, we examined whether the exchange rates in ASEAN-5 countries are driven by monetary fundamentals. We applied the panel unit root tests and found that the United States denominated nominal exchange rates of Malaysian Ringgit, Indonesian Rupiah, Philippines Peso, Singapore Dollar, and Thailand Baht are all integrated of order one. Meanwhile, relative money supply and relative real income are also integrated in the same order. Nonetheless, the relative interest rate is integrated in order zero, and it implies the uncovered interest rate parity held in ASEAN-5. By using a panel cointegration test pioneered by Pedroni (2000, 2004), we found evidence that there is a long-run relationship between nominal exchange rate and its monetary fundamentals. Consistent with the monetary model of the exchange rate, relative money supply is positively related to nominal exchange rates, while relative real income is negatively related to nominal exchange rates. Therefore, this study reveals the importance of relative real money supply and relative income for the exchange rate market players to predict and monitor ASEAN-5 exchange rates.

Nonlinear bilateral trade balance-fundamentals nexus: A panel smooth transition regression approach

This paper investigates the threshold effects on the impacts of fundamentals (i.e., incomes, exchange rates, oil prices, and import-weighted distances) on China's trade balances with the G7 countries between 1975 and 2010 by using a panel smooth transition regression (PSTR) model with the transition variable of lagged real interest rate differential. The empirical results show that the relationship between the trade balance and the fundamentals is rather nonlinear, changing over time and across countries depending on the lagged real interest rate differential during the different regimes. Moreover, China's bilateral trade balance responds significantly to the changes in relative real income differentials, real oil prices, and import-weighted distance. If the Federal Reserve adopts an expansionary monetary policy in the near future, China would still accumulate higher bilateral trade surpluses from most of the G7 countries, as long as the following situations exist: an increase in China's relative real per capita income, a slow increase in real oil price, and a stable RMB (the Chinese currency) exchange rate system.

Nontourism services in Barbados: 1970–97

This paper initially refers to some of the classifications of services used by various authors, followed by the components that comprise nontourism services in Barbados and their linkages to the other sectors of the Barbados economy. Using regression analysis, variables that may influence nontourism services in the long and short run are then identified. In the long run, the variables that impact nontourism services are relative real incomes, tourist arrivals, merchandise imports, commercial bank credit, relative prices, and government policy. The short run is influenced by relative real incomes, tourist arrivals, and merchandise imports. Since tourist arrivals influence nontourism services in the long and short run, Barbados must still focus on tourism activity to maximize its foreign exchange potential from nontourism services.

Monetary Unions and the Effects of Seigniorage Sharing

This paper examines the influence relative real income between countries and the distribution of seigniorage have on the equilibrium inflation rate. I find that the allocation of seigniorage influences the equilibrium inflation rate when relative real income differs between countries. When the allocation of seigniorage is from a "rich" country to a "poor" country, the equilibrium inflation rate increases. When the allocation of seigniorage is from a "poor" country to a "rich" country, the equilibrium inflation rate decreases.