Three essays on expectations, unit roots and cointegration in developed and newly industrializing countries

The Dissertation has three essays which examine three important issues in international economics, exchange rate expectations in developed countries, unit roots and trend breaks in developing countries in east and southeast Asia, and exchange rate determination and inflation in southeast Asian countries.;The first essay investigates exchange rate expectation using multivariate models for five industrial countries. We compare static and adaptive expectations and determine whether adaptive expectations are regressive or extrapolative. We find evidence that investor's expectations are regressive, although, static expectations can be rejected in favor of adaptive expectations only for Japan.;In the second essay, we examine trend breaks and unit roots in aggregate and per capita real GDP for nine newly industrializing (NIC) and newly exporting countries (NEC). In 17 of the 18 cases, we reject unit roots in favor of trend stationarity with trend breaks. Our findings allow us to trace the growth paths of these NICs and NECs. The shifts are due to internal and external "forces". Government policies which result in market distortions are often followed by slower economic growth.;In the third essay, we use structural open economy models consistent with Dornbush (1976b) and Theories Consistent Expectations (TCE), which incorporate cointegration, to examine exchange rate determination and inflation in southeast Asian countries. The Dornbush model is rejected in favor of the TCE model. Our results show that southeast Asian countries' effective exchange rates exhibit overshooting, just like industrial countries. Effective exchange rate depreciation significantly affects inflation in the Philippines but its effect is only marginally significant in Malaysia and Singapore. Inflation is also affected by foreign prices in Malaysia, foreign prices and excess foreign demand in Singapore and foreign prices, excess foreign demand and excess monetary growth in the Philippines.