We show that the behaviour of the real exchange rates of the UK, Germany, France and Japan has been characterised by structural breaks which changed the adjustment mechanism. In the context of a Time-Varying Smooth Transition AutoRegressive of the kind introduced by Lundbergh et al (2003), we show that the real exchange rate process shifted in the aftermath of Black Wednesday in the case of the Pound, in 1984-5 in the case of the Franc and, more tentatively, during the Asian crisis of 1997-8 in the case of the Yen.
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Publisher Info
Paper provided by Cardiff University, Cardiff Business School, Economics Section in its series Cardiff Economics Working Papers with number
E2006/21.
Length: 35 pages Date of creation: Jul 2006 Date of revision: Publication status: Published in Applied Financial Economics,19:2,121-134. DOI: 10.1080/09603100701765216 Handle: RePEc:cdf:wpaper:2006/21