On openness and real exchange rate volatility
We address the puzzle concerning the inverse relationship between openness and real exchange rate volatility. We argue that the relationship can be explained by increased openness facilitating purchasing power parity. Using New Zealand data, we show that increased openness prolongs real exchange regimes characterised by fast mean-reversion and low volatility.
Volume (Year): 6 (2008)
Issue (Month): 14 ()
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- Alba, Joseph D. & Papell, David H., 2007. "Purchasing power parity and country characteristics: Evidence from panel data tests," Journal of Development Economics, Elsevier, vol. 83(1), pages 240-251, May.
- Hau, Harald, 2000.
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CEPR Discussion Papers
2356, C.E.P.R. Discussion Papers.
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- Devereux, M.B. & Lane, P.R., 2002.
"Understanding Bilateral Exchange Rate Volatility,"
CEG Working Papers
20025, Trinity College Dublin, Department of Economics.
- Devereux, Michael B & Lane, Philip R., 2002. "Understanding Bilateral Exchange Rate Volatility," CEPR Discussion Papers 3518, C.E.P.R. Discussion Papers.
- Michael B. Devereux & Philip R. Lane, 2002. "Understanding Bilateral Exchange Rate Volatility," Trinity Economics Papers 200211, Trinity College Dublin, Department of Economics.
- Michael Bleaney, 2008. "Openness and Real Exchange Rate Volatility: In Search of an Explanation," Open Economies Review, Springer, vol. 19(2), pages 135-146, April.
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