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Real exchange rate misalignments

  • Terra, Cristina
  • Valladares, Frederico

This paper investigates episodes of real exchange rate appreciations and depreciations for a sample of 85 countries from 1960 to 1998. A Markov Switching Model is used to characterize real exchange rate misalignment series as stochastic autoregressive processes governed by two states corresponding to different means and variances. Our main findings are: first, some countries present no evidence of distinct misalignment regimes; second, for some countries there is no RER misalignment in one of the regimes; and, third, for the countries with two misalignment regimes, the appreciated regime has higher persistence than the depreciated one.

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Article provided by Elsevier in its journal International Review of Economics & Finance.

Volume (Year): 19 (2010)
Issue (Month): 1 (January)
Pages: 119-144

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Handle: RePEc:eee:reveco:v:19:y:2010:i:1:p:119-144
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/620165

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