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Official Exchange Rate Arrangements and Real Exchange Rate Behavior

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Author Info

  • Parsley, David C
  • Popper, Helen A

Abstract

We study the behavior of real exchange rates under various official designations of exchange rate arrangements. Examining many currencies, we find important differences across the designations. Most notably, real exchange rate mean reversion is fastest when nominal exchange rates are officially pegged. We also find a large nonlinear effect: adjustment is fastest when the real exchange rate deviates greatly from its mean. This nonlinear effect is also most striking among officially pegged currencies. Finally, we find that nominal exchange rates, rather than prices, do most of the adjusting.

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Bibliographic Info

Article provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.

Volume (Year): 33 (2001)
Issue (Month): 4 (November)
Pages: 976-93

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Handle: RePEc:mcb:jmoncb:v:33:y:2001:i:4:p:976-93

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879

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Citations

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Cited by:
  1. David Parsley & Helen Popper, 2002. "Foreign Exchange Exposure and Exchange Rate Arrangements in East Asia," Working Papers 172002, Hong Kong Institute for Monetary Research.
  2. Alan M. Taylor, 2002. "A Century Of Purchasing-Power Parity," The Review of Economics and Statistics, MIT Press, vol. 84(1), pages 139-150, February.
  3. Pablo Astorga, 2010. "Mean Reversion in Long-Horizon Real Exchange Rates: Evidence from Latin America," Economics Series Working Papers Number 80, University of Oxford, Department of Economics.
  4. Mark J.Holmes, 2002. "Are there non linearities in US: Latin American real exchange behavior," Estudios de Economia, University of Chile, Department of Economics, vol. 29(2 Year 20), pages 177-190, December.
  5. Parsley, David C. & Popper, Helen A., 2006. "Exchange rate pegs and foreign exchange exposure in East and South East Asia," Journal of International Money and Finance, Elsevier, vol. 25(6), pages 992-1009, October.
  6. Choi, Chi-Young, 2004. "Searching for evidence of long-run PPP from a post-Bretton Woods panel: separating the wheat from the chaff," Journal of International Money and Finance, Elsevier, vol. 23(7-8), pages 1159-1186.
  7. Walter Enders & Kamol Chumrusphonlert, 2004. "Threshold cointegration and purchasing power parity in the pacific nations," Applied Economics, Taylor & Francis Journals, vol. 36(9), pages 889-896.
  8. Mohsen Bahmani-Oskooee & Abera Gelan, 2006. "Testing the PPP in the non-linear STAR Framework: Evidence from Africa," Economics Bulletin, AccessEcon, vol. 6(17), pages 1-15.
  9. Mohsen Bahmani-Oskooee & Ali Kutan & Su Zhou, 2009. "Towards solving the PPP puzzle: evidence from 113 countries," Applied Economics, Taylor & Francis Journals, vol. 41(24), pages 3057-3066.
  10. Fischer, Christoph, 2004. "PPP: a Disaggregated View," Discussion Paper Series 1: Economic Studies 2004,07, Deutsche Bundesbank, Research Centre.
  11. repec:ebl:ecbull:v:6:y:2006:i:17:p:1-15 is not listed on IDEAS
  12. Yougbaré, Lassana, 2011. "Exchange rate arrangements and misalignments: contrasting words and deeds," MPRA Paper 32362, University Library of Munich, Germany.
  13. Hiroyuki Taguchi & Harutaka Murofushi & Hironao Tsuboue, 2009. "Exchange rate regime and real exchange rate behavior," Economics Bulletin, AccessEcon, vol. 29(4), pages 2924-2936.

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