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On European monetary integration and the persistence of real effective exchange rates

  • Kruse, Robinson

This paper deals with the possibility of changing persistence in European real effective exchange rates as initially analyzed by Gadea and Gracia [2009. Finance Research Letters 6, 242-249]. By applying a CUSUM of squares-based test for constant versus changing persistence with desirable statistical properties, an OECD data set is reconsidered. The empirical results suggest that persistence remains constant over time for nearly all time series. Thus, European monetary integration has not affected the persistence of external competitiveness significantly. Moreover, strong evidence for non-stationarity is found. Explanations for the sharp contrast of new results towards the ones by Gadea and Gracia [2009. Finance Research Letters 6, 242-249] are provided.

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Article provided by Elsevier in its journal Finance Research Letters.

Volume (Year): 8 (2011)
Issue (Month): 1 (March)
Pages: 45-50

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Handle: RePEc:eee:finlet:v:8:y:2011:i:1:p:45-50
Contact details of provider: Web page: http://www.elsevier.com/locate/frl

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  1. Busetti, Fabio & Taylor, A. M. Robert, 2004. "Tests of stationarity against a change in persistence," Journal of Econometrics, Elsevier, vol. 123(1), pages 33-66, November.
  2. Graham Elliott & Thomas J. Rothenberg & James H. Stock, 1992. "Efficient Tests for an Autoregressive Unit Root," NBER Technical Working Papers 0130, National Bureau of Economic Research, Inc.
  3. Kim, Jae-Young, 2000. "Detection of change in persistence of a linear time series," Journal of Econometrics, Elsevier, vol. 95(1), pages 97-116, March.
  4. Gadea, Maria Dolores & Gracia, Ana Belen, 2009. "European monetary integration and persistance of real exchange rates," Finance Research Letters, Elsevier, vol. 6(4), pages 242-249, December.
  5. Stephen Leybourne & Robert Taylor & Tae-Hwan Kim, 2007. "CUSUM of Squares-Based Tests for a Change in Persistence," Journal of Time Series Analysis, Wiley Blackwell, vol. 28(3), pages 408-433, 05.
  6. Kim, Jae-Young & Belaire-Franch, Jorge & Amador, Rosa Badillo, 2002. "Corrigendum to "Detection of change in persistence of a linear time series" [J. Econom. 95 (2000) 97-116]," Journal of Econometrics, Elsevier, vol. 109(2), pages 389-392, August.
  7. Sarantis, Nicholas, 1999. "Modeling non-linearities in real effective exchange rates," Journal of International Money and Finance, Elsevier, vol. 18(1), pages 27-45, January.
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