Nonlinear Adjustment of the Real Exchange Rate Towards its Equilibrium Value: a Panel Smooth Transition Error Correction Modelling
Abstract
We study the nonlinear dynamics of the real exchange rate towards its behavioral equilibrium value (BEER) using a Panel Smooth Transition Regression model framework.We show that the real exchange rate convergence process in the long run is characterized by nonlinearities for emerging economies, whereas industrialized countries exhibit a linear pattern. Moreover, there exists an asymmetric behavior of the real exchange rate when facing an over- or an undervaluation of the domestic currency. Finally, our results suggest that the real exchange rate is unable to unwind alone global imbalances.Download Info
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Paper provided by CEPII research center in its series Working Papers with number 2008-23.Length:
Date of creation: Oct 2008
Date of revision:
Handle: RePEc:cii:cepidt:2008-23
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Keywords: Equilibrium exchange rate; BEER model; Panel smooth transition regression; Panel vector error correction model;Other versions of this item:
- Béreau, Sophie & Villavicencio, Antonia López & Mignon, Valérie, 2010. "Nonlinear adjustment of the real exchange rate towards its equilibrium value: A panel smooth transition error correction modelling," Economic Modelling, Elsevier, vol. 27(1), pages 404-416, January.
- F31 - International Economics - - International Finance - - - Foreign Exchange
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Longitudinal Data; Spatial Time Series
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-01-03 (All new papers)
- NEP-CBA-2009-01-03 (Central Banking)
- NEP-ETS-2009-01-03 (Econometric Time Series)
- NEP-IFN-2009-01-03 (International Finance)
- NEP-OPM-2009-01-03 (Open Economy Macroeconomic)
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Citations
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.Cited by:
- Cécile Couharde & Issiaka Coulibaly & Olivier Damette, 2011. "Misalignments and Dynamics of Real Exchange Rates in the CFA Franc Zone," EconomiX Working Papers 2011-28, University of Paris West - Nanterre la Défense, EconomiX.
- Novella Maugeri, 2010. "Money Illusion and Rational Expectations: New Evidence from Well Known Survey Data," Department of Economics University of Siena 606, Department of Economics, University of Siena.
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"Nonlinear expectations in speculative markets - Evidence from the ECB survey of professional forecasters,"
Discussion Papers of Business and Economics
1/2012, Department of Business and Economics, University of Southern Denmark.
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- Reitz, Stefan & Rülke, Jan-Christoph & Stadtmann, Georg, 2012. "Nonlinear expectations in speculative markets: Evidence from the ECB survey of professional forecasters," Discussion Papers 311, European University Viadrina Frankfurt (Oder), Department of Business Administration and Economics.
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