IDEAS home Printed from https://ideas.repec.org/a/bpj/bejmac/v13y2013i1p187-212n1008.html
   My bibliography  Save this article

Deconstructing shocks and persistence in OECD real exchange rates1)

Author

Listed:
  • Basher Syed Abul

    (Department of Research and Monetary Policy, Qatar Central Bank, PO Box 1234, Doha, Qatar)

  • Carrion-i-Silvestre Josep Lluís

    (AQR-IREA Research Group, Department of Econometrics, Statistics and Spanish Economy, University of Barcelona, Av, Diagonal, 690, 08034 Barcelona)

Abstract

We study the Purchasing Power Parity (PPP) hypothesis and the PPP puzzle for a sample of seventeen OECD economies when real exchange rates (RERs) are subject to multiple structural breaks. Applying recent panel econometric methods, we first show that RERs are found to be I(1) non-stationary processes when the analysis neglects structural breaks, while they are characterized as I(0) stationary stochastic processes when structural breaks are accommodated. This indicates that ignoring structural breaks can lead to model misspecification, which can bias (upward) shocks’ persistence measures. After controlling for structural breaks, our half-life point estimates appear below one year for both idiosyncratic and common measures of persistence of deviation from the changing mean.

Suggested Citation

  • Basher Syed Abul & Carrion-i-Silvestre Josep Lluís, 2013. "Deconstructing shocks and persistence in OECD real exchange rates1)," The B.E. Journal of Macroeconomics, De Gruyter, vol. 13(1), pages 187-212.
    • Handle: RePEc:bpj:bejmac:v:13:y:2013:i:1:p:187-212:n:1008
    DOI: 10.1515/bejm-2012-0060
    as

    Download full text from publisher

    File URL: https://doi.org/10.1515/bejm-2012-0060
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.
    File URL: https://libkey.io/10.1515/bejm-2012-0060?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    cross-sectional dependence; multiple structural breaks; panel data stationarity tests; shock persistence; JEL Classification: C32; C33; E31;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bpj:bejmac:v:13:y:2013:i:1:p:187-212:n:1008. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.degruyter.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.