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The Behavior of the Real Exchange Rate Under Fixed and Floating Exchange Rate Regimes

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Listed author(s):
  • Selahattin Dibooglu

    ()

  • Faik Koray

    ()

Abstract

This article investigates the behavior of real exchange rates under fixed and flexible exchange rates. Using data from both the Bretton Woods and the modern floating periods, we decompose real exchange rate movements into components attributable to supply shocks, real demand shocks, monetary shocks, capital flows shocks, and real oil price shocks. Empirical results show that real demand shocks are an important source of real exchange rate movements under both fixed and flexible rates, while monetary shocks are negligible. Supply and oil price shocks seem to be more important under Bretton Woods, while capital flows shocks seem to explain a relatively higher proportion of real exchange rate movements under the modern floating period. Copyright Kluwer Academic Publishers 2001

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File URL: http://hdl.handle.net/10.1023/A:1008394128869
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Article provided by Springer in its journal Open Economies Review.

Volume (Year): 12 (2001)
Issue (Month): 2 (April)
Pages: 123-143

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Handle: RePEc:kap:openec:v:12:y:2001:i:2:p:123-143
DOI: 10.1023/A:1008394128869
Contact details of provider: Web page: http://www.springer.com

Order Information: Web: http://www.springer.com/economics/international+economics/journal/11079/PS2

Keywords: real exchange rates; exchange rate systems;

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  1. Blanchard, Olivier Jean & Quah, Danny, 1989. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," American Economic Review, American Economic Association, vol. 79(4), pages 655-673, September.
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Cited by:

  1. Simeon Coleman & Juan Carlos Cuestas & Estefanía Mourelle, 2011. "Investigating the oil price-exchange rate nexus: Evidence from Africa," Working Papers 2011015, The University of Sheffield, Department of Economics, revised May 2011.
  2. Rabah Arezki & Kirk Hamilton & Kazim Kazimov, 2011. "Resource Windfalls, Macroeconmic Stability and Growth: The Role of Political Institutions," CESifo Working Paper Series 3678, CESifo Group Munich.
  3. Rabah Arezki & Klaus Deininger & Harris Selod, 2012. "What drives the global rush?," NCID Working Papers 02/2012, Navarra Center for International Development, University of Navarra.
  4. Huang, Ying & Guo, Feng, 2007. "The role of oil price shocks on China's real exchange rate," China Economic Review, Elsevier, vol. 18(4), pages 403-416.

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