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Exploring long-run relationship and error correction of Thai output and price

Applied Economics Journal

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Title Exploring long-run relationship and error correction of Thai output and price
 
Creator Chancharoenchai, Kanokwan; Department of Economics, Faculty of Economics, Kasetsart University,
Bangkok,Thailand,10900
 
Subject dynamic OLS,cointegration,asymmetric cointegration,error correction test
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Description As the Thai economy has integrated into the world system, it increasingly endures notonly internal circumstances, but also external turmoils. Stabilizing the country’s growthand inflation from macroeconomic shocks has then become a challenge to policymakers.This study thus concentrates on investigating the long-run relationship and the adjustmentprocess towards the equilibrium of output and price of Thailand from 2001 to 2014. Forthis purpose, the dynamic relationship, cointegration property, and error correction termare explored by DOLS, various cointegration tests, and ECM. The cointegration test alsoremarks the possibility of monetary policymakers to surprise the market in order to expectthe increase in output. It also reconfirms that the interest rate tends to be a passivemonetary instrument in curbing inflationary. Moreover, the adjustment process to the long-runof both output and price is found to have a symmetric cointegration property which impliesthe systematic ECM. The symmetric error correction test presents the significantly negativeelimination in the next quarter towards long term equilibrium. The monetary policymakersthus seem to react to the rise in inflation uncertainty by keeping down inflation. Meanwhile,the output level tends to have faster adjustment speed than that of the price level.
 
Publisher The Center for Applied Economics Research (CAER)
 
Contributor —
 
Date 2016-05-20
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
Peer-reviewed Article
 
Format application/pdf
 
Identifier http://www.tci-thaijo.org/index.php/AEJ/article/view/57253
 
Source Applied Economics Journal; Vol 22, No 1 (2015): June; 79-101
0858-9291
 
Relation http://www.tci-thaijo.org/index.php/AEJ/article/view/57253/47456
 
Rights Copyright (c) 2016 Applied Economics Journal
http://creativecommons.org/licenses/by-nc-nd/4.0