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Nonlinearity in real exchange rates: an approach with disaggregated data and a new linearity test

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  • Gawon Yoon

Abstract

Employing disaggregated real exchange rates from nine European counties in 16 goods categories, we assess in this study the nonlinearity in the real exchange rates. Surprisingly, we find evidence for nonlinearity in only four (10) out of 143 series with the linearity test proposed by Harvey et al. (2008) at the 5% (10%) significance level. This result differs greatly from those of Juvenal and Taylor (2008), Imbs et al. (2003), Sarno et al. (2004) and Berka (2009), who report ample evidence for nonlinearity for the same or similarly disaggregated real exchange rate datasets.

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  • Gawon Yoon, 2010. "Nonlinearity in real exchange rates: an approach with disaggregated data and a new linearity test," Applied Economics Letters, Taylor & Francis Journals, vol. 17(11), pages 1125-1132.
    • Handle: RePEc:taf:apeclt:v:17:y:2010:i:11:p:1125-1132
    DOI: 10.1080/00036840902817573
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