On openness and real exchange rate volatility
AbstractWe address the puzzle concerning the inverse relationship between openness and real exchange rate volatility. We argue that the relationship can be explained by increased openness facilitating purchasing power parity. Using New Zealand data, we show that increased openness prolongs real exchange regimes characterised by fast mean-reversion and low volatility.
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Bibliographic InfoArticle provided by AccessEcon in its journal Economics Bulletin.
Volume (Year): 6 (2008)
Issue (Month): 14 ()
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Find related papers by JEL classification:
- F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
- F1 - International Economics - - Trade
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- Hau, Harald, 2000.
"Real Exchange Rate Volatility and Economic Openness: Theory and Evidence,"
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- Devereux, Michael B. & Lane, Philip R., 2003.
"Understanding bilateral exchange rate volatility,"
Journal of International Economics,
Elsevier, vol. 60(1), pages 109-132, May.
- Michael B. Devereux & Philip R. Lane, 2002. "Understanding Bilateral Exchange Rate Volatility," Trinity Economics Papers 200211, Trinity College Dublin, Department of Economics.
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- Devereux, M.B. & Lane, P.R., 2002. "Understanding Bilateral Exchange Rate Volatility," CEG Working Papers 20025, Trinity College Dublin, Department of Economics.
- Alba, Joseph D. & Papell, David H., 2007. "Purchasing power parity and country characteristics: Evidence from panel data tests," Journal of Development Economics, Elsevier, vol. 83(1), pages 240-251, May.
- Michael Bleaney, 2008. "Openness and Real Exchange Rate Volatility: In Search of an Explanation," Open Economies Review, Springer, vol. 19(2), pages 135-146, April.
- Sayeeda Bano, 2010. "ASEAN-New Zealand Trade Relations and Trade Potential," Working Papers in Economics 10/01, University of Waikato, Department of Economics.
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