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Multiple structural regimes in real exchange rate misalignment: the case of Australian dollar

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  • Jean-Francois Hoarau
  • Ibrahim Ahamada
  • Alain Nurbel

Abstract

We apply the Bai and Perron method (Econometrica, 1998, 66, 47-78) to search for several structural changes in the real exchange rate misalignment data of the Australian dollar over January 1976 to February 2000. Then, the estimated structural breaks dates are compared with Australian monetary and exchange rate regimes from 1976. This brings us to conclude that a good monetary management is needed to face real exchange rate distortions. Besides, implementing a policy-mix by combining an inflation targeting policy and a dirty flexible exchange rate policy turns out to be really effective to struggle real misalignments as far as Australia is concerned.

Suggested Citation

  • Jean-Francois Hoarau & Ibrahim Ahamada & Alain Nurbel, 2007. "Multiple structural regimes in real exchange rate misalignment: the case of Australian dollar," Applied Economics Letters, Taylor & Francis Journals, vol. 15(2), pages 101-104.
    • Handle: RePEc:taf:apeclt:v:15:y:2007:i:2:p:101-104
    DOI: 10.1080/13504850600721908
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    1. Shakila Aruman & Mardi Dungey, 2003. "A Perspective on Modelling the Australian Real Trade Weighted Index since the Float," Australian Economic Papers, Wiley Blackwell, vol. 42(1), pages 56-76, March.
    2. Ij. Macfarlane, 1999. "Australian Monetary Policy in the Last Quarter of the Twentieth Century," The Economic Record, The Economic Society of Australia, vol. 75(3), pages 213-224, September.
    3. Jushan Bai & Pierre Perron, 1998. "Estimating and Testing Linear Models with Multiple Structural Changes," Econometrica, Econometric Society, vol. 66(1), pages 47-78, January.
    4. Macfarlane, I J, 1999. "Australian Monetary Policy in the Last Quarter of the Twentieth Century," The Economic Record, The Economic Society of Australia, vol. 75(230), pages 213-224, September.
    5. Jouini, Jamel & Boutahar, Mohamed, 2005. "Evidence on structural changes in U.S. time series," Economic Modelling, Elsevier, vol. 22(3), pages 391-422, May.
    6. Mohamed Safouane Ben Aissa & Jamel Jouini, 2003. "Structural breaks in the US inflation process," Applied Economics Letters, Taylor & Francis Journals, vol. 10(10), pages 633-636.
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    Cited by:

    1. Dağdeviren, Sengül & Ogus Binatli, Ayla & Sohrabji, Niloufer, 2011. "Misalignment under different exchange rate regimes: the case of Turkey," MPRA Paper 46774, University Library of Munich, Germany.
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