Author(s): Vesarach Aumeboonsuke
This study aimed to investigate whether relative purchasing power parity holds for the countries in ASEAN Economic Community namely Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam along the ten-year time period stared from September 2011 to August 2021. The real exchange rates were first examined by employing an Augmented Dickey-Fuller test. Consequently, the real exchange rates were examined further by including a trend at the origin to capture the Balassa-Samuelson effect. The time series of exchange rate were investigated by employing the Engle-Granger cointegration test to examine if the exchange rate at the nominal level and the relative price ratio were at the same order of integration or not. The half-life of each real exchange rate was studied in this approach. The analysis produced the relative purchasing power parity results and the adjustment speed of convergence to the parity equilibrium. All of the statistics were performed in R version 4.1.1. The results implied whether the economy in Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam were synchronized and well-prepared to form a single economic region.