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The behavior of real exchange rate: Nonlinearity and breaks

  • Lee, Chia-Hao
  • Chou, Pei-I

We analyze the possibility of nonlinear adjustment and unknown smooth breaks in the stationarity of real exchange rates in the Group of 20 (G-20) countries over a period from January 1994 to April 2010 by applying the Panel SURADF test with Fourier function. Although most of the results from a univariate unit root test and panel unit root test indicated a fail to reject the unit root null hypothesis in the real exchange rates of G-20, the results of the Panel SURADF test with Fourier function show a strong rejection of non-stationarity of real exchange rates among the G-20 and imply that PPP is valid for all in the G-20. The evidence also implies that there are nonlinearity and smooth breaks in real exchange rates of G-20 countries.

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

Volume (Year): 27 (2013)
Issue (Month): C ()
Pages: 125-133

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Handle: RePEc:eee:reveco:v:27:y:2013:i:c:p:125-133
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/620165

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