Non-linear and non-symmetric exchange-rate adjustment:New evidence from medium- and high-inflation countries
AbstractThis paper analyses a model of non-linear exchange rate adjustment that extends the literature by allowing asymmetric responses to over- and under-valuations. Applying the model to Greece and Turkey, we find that adjustment is asymmetric and that exchange rates depend on the sign as well as the magnitude of deviations, being more responsive to over-valuations than under-valuations. Our findings support and extend the argument that non-linear models of exchange rate adjustment can help to overcome anomalies in exchange rate behaviour. They also suggest that exchange rate adjustment is non-linear in economies where fundamentals models work well.
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Bibliographic InfoPaper provided by Economics and Finance Section, School of Social Sciences, Brunel University in its series Public Policy Discussion Papers with number 03-12.
Length: 30 pages
Date of creation: Jul 2003
Date of revision:
Contact details of provider:
Postal: Brunel University, Uxbridge, Middlesex UB8 3PH, UK
Other versions of this item:
- Michael G. Arghyrou & Virginie Boinet & Christopher Martin, 2003. "Non-linear and non-symmetric exchange-rate adjustment:New evidence from medium- and high-inflation countries," Economics and Finance Discussion Papers 03-12, Economics and Finance Section, School of Social Sciences, Brunel University.
- NEP-ALL-2004-07-11 (All new papers)
- NEP-CWA-2004-07-11 (Central & Western Asia)
- NEP-IFN-2004-07-11 (International Finance)
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- Aykut Kibritcioglu & Bengi Kibritcioglu, 2004. "Real Exchange Rate Misalignment in Turkey, 1987-2003 (in Turkish)," Macroeconomics 0403006, EconWPA, revised 09 Mar 2004.
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