Purpose

The sticky-price monetary model of exchange rate states the overshooting hypothesis as, exchange rate depreciation beyond its long-term value in response to an increase in money supply owing to the sticky nature of prices. Because of interest and relevance to policy, there is a huge extant literature on it but with mixed findings that suggest the need for further studies to refine the findings. Pakistan’s rupee exchange rate against the US dollar depreciated 128.44% over the period May 2007–December 2018. Considering this substantial decline in rupee's value, this study aims to examine either the rupee short-run value is over-shot of its long-term value.

Design/methodology/approach

This study uses a linear ARDL approach that segregates the short-run and long-run effects thus clarifying the premise of exchange rate overshooting. Furthermore, this study also uses nonlinear ARDL as a robustness check incorporating structural breaks.

Findings

Findings based on a linear model show evidence of exchange rate undershooting that means a positive money shock causes the exchange rate to appreciate. A nonlinear analysis also provides support to these findings. However, the increase in relative money supply has more such effect than that of a decrease in the relative money supply. Moreover, the authorities’ inclination to stabilize the exchange rate appreciates its short-run value.

Originality/value

This study substantiates the overshooting hypothesis literature by considering the role of asymmetric effects of exchange rate determinants and structural breaks that is a rare attempt in the extant literature.

中文翻译：

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新兴经济体的汇率是否超调？

目的

汇率粘性价格货币模型将超调假设描述为，由于价格的粘性，货币供应量增加导致汇率贬值超过其长期价值。由于对政策的兴趣和相关性，存在大量关于它的文献，但结果参差不齐，表明需要进一步研究以完善研究结果。2007 年 5 月至 2018 年 12 月期间，巴基斯坦卢比兑美元汇率贬值 128.44%。考虑到卢比价值大幅下跌，本研究旨在检验卢比的短期价值是否超过其长期价值.

设计/方法/方法

本研究使用线性 ARDL 方法来区分短期和长期影响，从而阐明汇率超调的前提。此外，本研究还使用非线性 ARDL 作为结合结构断裂的稳健性检查。

发现

基于线性模型的研究结果显示了汇率下冲的证据，这意味着正的货币冲击会导致汇率升值。非线性分析也为这些发现提供了支持。然而，相对货币供应量的增加比相对货币供应量减少的影响更大。此外，当局稳定汇率的倾向使其短期价值升值。

原创性/价值

本研究通过考虑汇率决定因素的不对称效应和结构性中断的作用来证实超调假设文献，这在现有文献中是罕见的尝试。